How to Get Out of a Cosigned Car Loan

by Cindy Quarters

    Once you’ve cosigned for a car loan, you’ve agreed to make the payments if the original borrower doesn’t. If you no longer want to be in that position, you might be able to get out of it. A lot depends on your ability to find a lender who is willing to refinance the loan under the name of the person you co-signed for. It also depends on your ability to work with the person you co-signed for.

    Step 1

    Check other lenders to see if there is one that specializes in high-risk loans and is willing to refinance the loan without you as a cosigner. The person you cosigned for will have to help with this step, since any lender is going to want a lot of personal information from the borrower before making a decision. A new lender might require that the borrower pay a higher interest rate or want him to put some more cash down to lessen the lender’s risk.

    Step 2

    Look for other people to cosign in your place, if the borrower can’t get a new loan without a cosigner. He might have a close friend or family member willing to help him out. Have him contact other potential cosigners to see if he can find someone willing to step in and take your place. Whoever he finds will have to be acceptable to the lender, too.

    Step 3

    Pay the car loan off yourself and have the borrower pay you back. The advantage of doing this is that you no longer risk damaging your own credit score if the borrower misses payments with the original car lender. In addition, you won’t be responsible for late fees, interest and other penalties that pile up when payments aren’t on time. The risk, of course, is that he might not make payments to you and you end up losing money on your investment. Just be sure to hire a lawyer to write up or review the payment contract between yourself and the borrower. If he falls behind on your payments, you want to have legal authority to repossess the car and sell it yourself.


    • When you cosign for something, it goes on your credit and changes your debt-to-income ratio until it’s paid off. This can hinder your ability to make important purchases of your own, such as a house or a car.

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