- Learning Center»
- Auto Loan Basics»
Breakups and Car Loans: How to Remove Your Ex From a Cosigned LoanMay 13, 2020
by Lindsay VanSomeren
Refinancing is one of three options to remove a cosigner from a car loan.
Cars are meant to be the ultimate symbols of freedom cruising down an empty highway, with the top down, and wind in your hair as you make your way on to your next adventure. But too often, it turns into just the opposite: a trap.
There are a lot of reasons why people go in together on a car loan. Maybe theyre married and its supposed to be joint property anyways. Sometimes, a parent or a friend cosigns a loan for someone else who isnt able to get a car loan on their own.
Either way, even though you might start these relationships and loans with the best of motives, sometimes those intentions head south. And when they do, you might be wondering how you can get out of that cosigned or co-borrowed auto loan.
There are ways to do it, but first, itll depend on your circumstances more than anything else.2022 Auto Refinance Rates See Today's Rates
Factor #1: Cosigner, or Co-Borrower?
The first question youll have to consider is whether youre a cosigner, or a co-borrower. They sound similar, and they are in some ways. For example, in either case, everyone listed on the loan whether theyre a cosigner or a co-borrower is ultimately responsible for paying the loan.
Cosigners Are Only Responsible for the Loan
In a cosigner situation, one borrow is the primary borrower. Thats usually the person whos going to use the car, and who has the primary responsibility in paying it off. For example, if a parent cosigns on a loan for their daughters 18th birthday, its the daughter who will drive the car and be primarily responsible for payments.
But if she falters and falls behind, then the parents are on the hook to make the payments. The lender will come after mom and dad for the money, in that case. Even worse, the late payments will be listed on both the daughters and the parents credit report, potentially ruining both of their credit scores.
Thats a scary thing to think about if youre on a cosigned loan, but at least the damage is limited to just your credit history. Thats not necessarily the case if youre a co-borrower, however.
Co-Borrowers Are Responsible for the Loan and the Car
If youre a co-borrower on a loan, youre also still responsible for the loan. In the eyes of the lender, however, youre jointly responsible, with the same payment responsibilities of the other borrower. In other words, youre not just a backup way to get paid. Theyll come to you right away along with the other person if someone doesnt pay the loan.
One of the biggest differences, however, is that co-borrowers also have a claim to the car. The title will be in both of your names. If you co-borrowed on a loan with your boyfriend, for example, both you and your boyfriend own the car together. And this has huge impacts on your options for how to get out of the car loan.
Factor #2: How Cooperative Is the Other Person?
Unfortunately, you need some cooperation, says Leslie Tayne, Esq., and founder of Tayne Law Group. Ive had many people come in here saying, What do I do now? I say, You cant do anything. Without their cooperation, its just not going to happen.
This is especially true in the case of co-borrowers. Since the other person is also a joint owner of the car itself, youll generally need their permission before making any major changes like refinancing it out of their name, retitling it in your name, selling the car, etc. It can create a huge hassle, especially if you and the other person arent on speaking terms anymore.
Factor #3: Are There Any Written or Legal Agreements in Place?
Weve described the general rules for how cosigned and co-borrowed loans operate. But sometimes those rules go out the window, especially if theres a pre-existing agreement in place, such as a divorce decree, a prenuptial agreement, or even just a handwritten and signed agreement.
For example, according to Tayne, a common example with car loans in divorce cases is when a husband and wife split up. The question becomes whos responsible for [paying the loan] and whos keeping the car, and theres two different sides of that. Theres the divorce side of it, and the legal side. Sometimes they actually cant get things refinanced, and yet the other is responsible for it.
So, for example, while the divorce decree might tell a stay-at-home spouse to refinance their car loan in their own name, they might not actually be able to. According to the decree, the car might legally be theirs and theirs alone, but because they cant refinance, the other spouse will continue having to pay the car loan for them even though they dont have any legal right to it anymore.
It does add a very interesting perspective, because it does come up a lot in divorces, says Tayne.
You dont need to be married to need an agreement. Anytime theres an exchange of money, its a good idea to have a written agreement in place. Make sure to specify exactly whos responsible for what, and what will happen if they dont follow through. This will help keep your options open for what you can do if you have a falling-out later on.
Now that weve thought about what factors might affect the options are available to you, its time to look at those options.
Auto Refinance Calculator Calculate Your Savings
Option #1: Get a Cosigner Release
If you cosigned for a loan, one of the quickest routes out is to apply to the lender for a cosigner release. This lets the cosigner off the hook, so that only the primary borrower is the one listed on the loan going forward.
Its not quite so simple, however. Theres a reason you may have been asked to be a cosigner on another persons loan in the first place. The lender wasnt entirely confident that the primary borrower would be able to make on-time payments on their own.
For that reason, usually only people who have demonstrated a good track record of making each loan payment on time for several years running are able to apply for cosigner release. And not all lenders will agree to it, either. Not all lenders offer a cosigner release option, so the only way to know is to reach out the lender and ask.
Unfortunately, this option isnt available if youre a co-borrower on the loan.
Option #2: Refinance the Loan
Whether youre a cosigner or a co-borrower (or, for that matter, if youre the only one listed on the loan at all), you can always try to refinance in your own name. This option has the added benefit of potentially allowing you to get better interest rates, different loan term lengths, and/or smaller monthly payments as well.
But again, it depends on whether youre a cosigner or a co-borrower.
Youre going to have difficulty refinancing it without the consent of the other party in the case of a co-borrower, says Tayne. Again, that can be tricky if your co-borrower isnt cooperating with you.
It can also be tricky if you needed the co-borrower or cosigner to get that loan in the first place. Youll need to be able to qualify for a new loan based on your own good credit and income. Luckily there are many lenders out there willing to refinance your auto loan if your credit isnt top-notch there is no minimum credit score requirement to refinance.
Make sure you consider the pros and cons of refinancing before you sign on the dotted line.Ready to refinance your car loan? Find a Better Loan Now
Option #3: Pay Off the Loan
Easier said than done, right? The average used car loan was $20,554 in 2019, according to a recent Experian study. If you had enough extra cash lying around to pay off the loan, chances are you would have already done it by now.
There is one way to raise enough money to pay off the loan, though: by selling the car. This might be tough if youre attached to the car, but consider the consequences if things go bad. If the other person decides to skip town and stop paying, then you could be on the hook for the payments.
Again, if you have a co-borrower, youll need to get their permission before you sell the car because legally, its their car too.
Remember to Retitle the Car
Getting your ex off the loan is one thing, but if youre a co-borrower, youll also need to consider whos on the title. Generally, both borrowers are listed on the car title, which might be something you want to avoid if youve split with your ex for good. If the other person is also listed on the title, they can take the car away from you and there may be little you can do about it.
Luckily, there might be an easy out for you in this case. Check the owners listed on your cars title. Specifically, look for and/or in between your names. If its an or, as in, John Doe or Jane Doe, it should only take one of you to retitle the car in your own name. But if its an and, as in John Doe and Jane Doe, both of you will need to go to your states motor vehicle department and consent to retitling the car in just one persons name.
My best advice is to think before you sign and have an agreement. Put it in writing what the responsibilities are of everybody, so that everybodys clear, says Tayne. And if something comes up, at least you have something in writing. If you have something in writing, then you might have some legal standing if you need to go to court.
Having a written exit plan is sound advice for anyone, and good to remember in the future. But for now, the best way for how to remove a cosigner from a car loan is probably by applying for cosigner release. If thats not an option or if youre a co-borrower on the loan, refinancing or selling the car to pay off the loan are your other two options.Compare Auto Refinance Rates
No impact to credit score. Shop For Rates Now
About The Author
Lindsay VanSomeren is a personal finance expert who has written for many websites such as Credit Karma, LendingTree, The Balance, and Experian. She currently lives in Kirkland, Washington with her husband, two cats, and a dog. In her spare time she enjoys homebrewing, reading, and outdoor adventures.