Co-signing on an automobile is a risky proposition. Many parents co-sign for adult children buying their first new car after college. Some people even co-sign for friends or co-workers. The result can be disastrous because lenders fully expect the co-signer to pay the full balance on the loan if the primary borrower defaults. Options for removing your name as a co-signer on an auto loan are extremely limited.
Monitor the payments on the loan. This does not remove your name as a co-signer but could alert you to possible financial trouble for the co-signer. Or you may discover that the co-signer seems to be doing fine financially and there is no hurry to have your name removed from the loan. Contact the bank to ask how you can receive updates on the loan as the co-signer.
Convince the co-signer to refinance the loan into his name only. This is the only way the bank is going to let you out of the loan. The bank has no incentive to remove you as a co-signer unless the primary borrower is capable of qualifying for a refinancing on his own.
File for bankruptcy. This is obviously an extreme measure and should be avoided unless you have other pressing financial problems as well. Filing for bankruptcy will strip away your obligation as co-signer on all debts.
- Bankrate.com; Car Loan Co-Signer Gets Socked With Costs; Steve Bucci; November 2009
- Bankrate.com; How to Remove a Co-Signer From A Car Loan; Tara Bakus Mello; April 2010
- Consumer Financial Protection Bureau. "What Is a Debt-to-Income ratio? Why Is the 43% Debt-to-Income Ratio Important?" Accessed Aug. 26, 2020.
- Federal Trade Commission. "Co-Signing a Loan." Accessed Aug. 24, 2020.
- Wells Fargo. "Secured Loans and Lines of Credit." Accessed Aug. 24, 2020.
- SoFi. "Using Collateral on a Personal Loan." Accessed Aug. 24, 2020.
- First Alliance Credit Union. "The Basics for Needing a Cosigner on a Loan." Accessed Aug. 25, 2020.
Robert Lee has been an entrepreneur and writer with a background in starting small businesses since 1974. He has written for various websites and for several daily and community newspapers on a wide variety of topics, including business, the Internet economy and more. He studied English in college and earned a Bachelor of Arts in liberal arts from Governor's State University.