If you co-sign on a loan the lender may let you off the hook but don’t count on it.

If you’re wondering if a co-signer can be removed from a car loan, the short answer is yes, in some cases—and it’s not likely.

When it comes to any loan (including auto, personal, home and student loans) co-signers can request to be released but lenders are reluctant to agree. In fact, studies show that nearly 40% of cosigners pay off some or part of a loan. Here are things you can do if you’re on someone else’s loan.

Request release from a co-signed loan

Co-signers can make a written request to the lender to be released from a loan. In certain cases, like some student loans, there may be a provision that allows a co-signer to take their name off a loan. Most loans, however, do not include such a provision.

A lender that allows for co-signer release will look at the primary borrower’s credit-worthiness to see if they have the ability to repay the loan. In all cases, the lender wants assurance the loan will be repaid. If, for example with a student loan, the primary borrower is advancing in their career and has sufficient income and a low debt-to-income ratio, the lender may agree to release a cosigner.

Statistics indicate that you should not count on a lender release. The Consumer Financial Protection Bureau (CFPB) reports that 9 out of 10 people who applied for a co-signer’s release on a student loan were rejected. That means only 10% of release applications were approved.

Get sample letters from the CFPB for cosigners requesting to be released from student loans.

What other actions can co-signers take?

Any loan you co-sign on affects your credit score and ability to get loans, so you want to ensure the debt gets paid.

Have a conversation with the primary borrower. Discuss if one of the following options is viable:

• Can the primary borrower refinance the loan in their own name? A personal loan, auto loan or credit card may be possible if their credit has improved since the time of the original loan application when they needed you as a co-signer.
• If the loan is for something like a home or car, can the asset be sold, and the funds used to pay off the loan? (If the asset is only titled in the primary borrower’s name you must have their cooperation to sell the asset.)
• Does the primary borrower have any other assets that could be sold to pay off the debt?

If the primary borrower isn’t willing or able to do any of the above, a co-signer still has an obligation to pay the debt. Make sure payments are made. Late or missed payments will knock down your credit score. If the unpaid debt is turned over for collections, you’ll start hearing from a collection agency and you could be sued for the amount due plus attorney fees and court costs.

If you’re looking to finance a major purchase of your own soon, it could be worthwhile to pay off the loan so you can reduce your debt-to-income ratio.

If financial hardship prevents you from making payments you can seek forbearance from the lender. If granted, forbearance temporarily pauses payments but does not forgive the loan. Payments will resume at the end of the forbearance period, perhaps up to 12 months.

When the debt is paid off, close the account.

What to do next time someone asks you to co-sign

In the future, if anyone asks you to co-sign on a loan, ask yourself: Am I willing and able to pay off this debt if the other party doesn’t?

If you have the money on hand and want to help, you may consider offering the requested funds as a gift. Gifting avoids risk of damage to your credit score or your relationship with the person asking for money.

 

All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, and collateral conditions. Federally insured by NCUA