Last Updated on October 7, 2022 by Bernard Juchli
If you no longer need a cosigner in your car payment, you can kick them out. In this article, we’d be assessing the various ways regarding how to remove a cosigner from a car title safely. Besides, it’s not mandatory to have them in your car loan for life, which makes them legal owners of the car.
You need a cosigner for car loan approval, especially if you have no job or credit is bad. However, per the changes in the transaction, you may have to remove them from your car. The common way is to inform the cosigner to release themselves from the financial responsibility.
Of course, the cosigner will be willing to discontinue being liable for the risk the car payment carries. In most cases, a borrower could have been financially capable before removing a cosigner. A consigner leaving the title also eliminates the chances of their credit being affected when the loan is defaulted.
Who is a Consigner on a Car?
Technically, a cosigner can be considered a security. A cosigner is a person that a borrower needs to obtain loan approval when their income or credit is insufficient to qualify for a loan. In the case of a car loan, a cosigner helps the borrower to secure enough credit or income score to obtain the loan.
Typically, a cosigner’s credit and income are stronger. The lender also considers the cosigner capable of repaying the loan since the borrower with bad credit is high risk.
A consigner would be served a notice to guarantee the debt. In this regard, if the borrower fails to repay the loan, the cosigner becomes liable for the loan balance and is obligated to complete the payment.
To a cosigner, car loan co-signing is risky, especially when the borrower’s source of income is unstable, which affects the cosigner’s credit should the borrower fail to repay the debt. Depending on the debt amount, a cosigner’s credit may be greatly affected, affecting their credit access and revolving credit, including credit cards.
Can a Cosigner be Removed from a Car Title?
Yes, a cosigner can be removed. However, a borrower may have to refinance the car loan. To refinance a car loan requires a borrower to take out a new loan. It can be from a different lender with lower interest, to pay off an existing loan and operate on a new loan policy thereafter.
How to Remove a Cosigner from a Car Title
This section discusses the various methods to remove someone that co-signed your car loan. Below are the steps regarding how to remove a cosigner from a car title:
Complete the Loan Payment
If you’re financially stable, you can pay off the debt. You can take out the money from savings or tax returns. After paying off the debt, you’d feel freed and more comfortable. First, get the payoff amount, different from the current balance, from your lender. Finally, follow the provided steps to pay off the debt to become a registered owner of the car.
Refinance Your Car Loan
A borrower can refinance a car loan to get rid of a cosigner on the title. You’d have to refinance the car alone. Follow this option if you are financially buoyant or can gather enough money to complete the loan payment.
To refinance a vehicle, you would be taking out a new loan with another lender to pay off your current debt under new terms and conditions going forward. Only consider this option if you can afford regular and timely payments. Also, your credit score needs to have been growing and creditworthy before you find a new lender. The reason is that another lender will also consider your credit before approving the loan.
When selecting a new lender, you want to look at the benefits including flexible monthly payments and lower interest rates. If the terms of your new lender are similar to the existing terms, it’s needless. Meanwhile, we’ve written about how you can lower a car loan without refinancing it.
Sell Your Vehicle
A borrower can sell a car with a lien and cover the payoff amount with the sales proceeds. Meanwhile, see how to remove a lien on a car! However, you must not be upside down on the loan; otherwise, it’ll increase the final amount you pay on the car. Since the car is yours, you do not need the cosigner to decide whether you sell the car or not. The cosigner’s obligations end at financing the car and being liable if you fail to complete the payment. However, you must inform them about your plans.
Ask the Lender to Release the Consigner
A borrower can ask the lender to release the cosigner. However, you must meet certain terms, which would include that you can pay off the loan alone. Refer to the loan contract or ask the lender about removing the cosigner from your car title.
Put the Title in Your Name
When you remove the cosigner using any of the options mentioned above, you also remove their name from the car title.
You may be able to complete the cosigner removal without completing the loan payment. You will sign the title over to yourself. If the car title uses ‘and’ (your name and the cosigner), the cosigner must also sign because they are also a registered owner of the vehicle. However, if the title uses ‘or’, any one of you – borrower or cosigner, can sign the title.
To register the car ownership in your name, you will need proof of the loan payment, title application form, and valid photo ID. You can down the application form from your state’s DMV’s website.
If the car has a lien on it, you also need the release of lien or any other notification from the lienholder or lender (in this case). If you refinanced the car, you’d also require a new loan agreement.
Go to your DMV and submit the documents. You will pay a processing fee mentioned on your DMV’s website, typically $20-$30.
As mentioned earlier, to remove a cosigner from your car loan, you must pay the debt with your money or refinance the car. By refinancing the car, you are repaying your current loan using another loan with more friendly terms and conditions, and an interest rate.
Finally, when you decide to get rid of the co-signer, inform them. If possible, pay off the loan in full.