Can a Co-Signer Refinance a Car?

Many auto lenders allow borrowers to refinance and get better terms.
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If you have a co-signer to an auto loan and want to refinance the loan in your own name, take the appropriate steps to remove any other co-signer before assuming the full financial responsibilities of a new loan. The lender will review your credit and require you to demonstrate proof of your ability to pay off the obligation.


Loan Terms

The terms of your financing agreement may allow the release of a co-signer if the payments have been made on time for a specific amount of months. You and the other borrower will need to contact your lender and complete the application process to request a release. If this option is not included in your contract, your lender must voluntarily agree to the release using other methods.

Loan Refinancing

Refinancing is one of the common ways to remove an original co-signer from the repayment obligations. Your current lender may offer refinancing options, but often you have to shop around, compare rates and apply for pre-approval with other financial institutions. If you qualify for refinancing, the new loan will pay off the first loan, thereby releasing the obligations of any other co-signer. You will sign a new financing contract, agreeing to new loan terms and rates. In regards to the first loan, the lender will report it as closed or paid in full on the credit report of all borrowers.


Qualifying for Refinancing

Refinancing your car loan may allow you to get more favorable terms and a lower interest rate. However, most auto lenders are not willing to extend loans to high-risk borrowers. If you've developed a stable payment history since taking out the original loan, you may have a good chance getting a refinance. Some banks will agree to a refinance more readily if the car is worth more than the remaining balance.

Removing Name from Title

Once the first loan is completely refinanced and replaced by the new loan, you will get a copy of your new title. The original co-signer will automatically be released when the new loan takes effect. Since the removed co-signer is not considered a co-owner to the vehicle, your name will be the only one appearing on the title as the owner.