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Can you switch co-signers on a car loan?

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While initially entering a car loan with a co-signer may appear advantageous, circumstances may not always unfold as anticipated. The relationship between the primary borrower and the co-signer may deteriorate, or the co-signer’s financial situation may change, prompting them to seek an exit from the agreement.

Although it is theoretically possible to remove a co-signer from a loan, it is highly improbable to replace one co-signer with another on the original loan. This process is intricate and may entail refinancing the loan, completing co-signer release paperwork, or even satisfying the loan in its entirety to terminate the co-signer’s involvement.

You cannot add a co-signer to an existing loan

Typically, lenders do not facilitate the replacement of a current co-signer with a new one on an existing car loan. This is because such a change would necessitate the lender to essentially reevaluate the application for a new auto loan. While it is always advisable to inquire with the lender regarding this possibility, it is important to note that substituting one co-signer for another on an existing loan is not a standard practice.

If you’ve come across the term “loan modification” before, you might be wondering if it’s an option for you. Loan modification is a process that typically involves adjusting the terms and conditions of a loan, rather than altering the parties involved in the loan agreement.

It is generally reserved for situations where you may be facing difficulties in making payments and need to collaborate with your lender to ensure you can stay on track with your loan obligations.

Swap co-signers by refinancing

To add or remove a co-signer on an auto loan, a more effective approach is to refinance the loan. This involves opening a brand new loan that covers the outstanding balance of the existing loan and closes the account.

Whether you choose to refinance with the same lender or explore options with a new one, you will have the flexibility to apply with the same co-signer, a different co-signer, or no co-signer at all.

Please bear in mind that in order to be eligible for the new loan, you must meet the necessary requirements. If you haven’t made any improvements to your credit since your initial car purchase, obtaining the loan without a co-signer may prove challenging.

Remove a co-signer with a co-signer release

Although not all lenders provide this alternative, there are instances where it is feasible to eliminate a co-signer by fulfilling a co-signer release.

  1. Contact the lender: To begin, get in touch with the lender who provided the loan and inquire about the availability of a co-signer release option. This step is crucial in your pursuit of improved writing quality, as it ensures optimal word choice, structure, readability, and eloquence while preserving the original meaning.
  2. Complete the required paperwork: If the lender provides a release option, you will generally be required to fill out paperwork that removes the co-signer from the loan and designates you as the primary borrower responsible for repaying the loan. Only the primary borrower has the authority to initiate this modification to the loan.
  3. Lender approval: Approval of the co-signer release by a lender is not guaranteed. You must demonstrate your ability to manage the loan independently, which includes maintaining an acceptable credit score and having the financial resources to meet repayment obligations.

Modifying this type of change may result in a revision of your loan term. Additionally, removing a co-signer could potentially impact the interest rate of your loan, especially if the initial approval was contingent upon the co-signer’s favorable credit history.

The bottom line

Switching or removing a co-signer on a car loan is more complex than it may seem. It often involves refinancing the loan, paying it off completely, or navigating the process of obtaining a co-signer release, if available from the lender.

Before asking someone to co-sign a loan, it’s crucial to carefully consider your decision and choose someone you trust.

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