Does My Loan Cosigner Have to Be on the Title or My Car Registration?

Does My Loan Cosigner Have to Be on the Title or My Car Registration?
Woman signing a document

Benefits of a Cosigner

For young car buyers or car buyers with a poor credit history, obtaining a loan can be difficult. Lenders may be reluctant to lend to them at all or require a sky-high interest rate to compensate for the additional risk. Cosigners are a way for consumers with bad credit or no credit to obtain a car loan at a competitive rate. By co-signing on a loan, the cosigner agrees to take over payments if the primary signer stops making them.

Joint Ownership

It's likely that your car's title will list your lender's name while you have an outstanding loan. If both your name and the cosigner's name are listed on the registration, it indicates you have joint ownership of the car. This means that you can't resell the car without the cosigner's consent and signature. However, a loan cosigner doesn't need to be on your car paperwork. Instead, he can choose to simply co-sign the loan and include his name only on the financial documents. Unless you're married to your cosigner or you have some sort of legal tie, this means that the cosigner has little or no legal claim to the car.

Risks for the Cosigner

Your cosigner may be hesitant to cosign the loan without putting his name on the registration. That's because if you default on your payments, your cosigner could be stuck making payments on a car that he can't even use or sell. Bankrate recommends that cosigners include themselves on the registration and obtain a copy of a car key before cosigning on a loan.

Removing a Cosigner

If you have a cosigner on your car registration or title, you have options to remove his name from your car documents. If you build substantial credit to carry the loan on your own, you can have the loan refinanced or modified to exclude the cosigner. If you've paid off the loan, you can change the car title through your state's DMV office. If your cosigner won't cooperate, you may need to go to court to have his name removed.