How to Remove Yourself as a Co-Signer on a Loan

(April 2024)

How to Remove Yourself as a Co-Signer on a Loan

In This Article

Want to get your name off a co-signed loan? Co-signing a loan is a decision you shouldn’t make blindly; you’re getting into some solemn financial obligation that stakes both your money and credit. As a co-signer on a loan, you’re responsible for the payments if the primary borrower defaults.

However, if you’re not comfortable with how the borrower is handling the payments, and you later decide to remove yourself as a co-signer, here are some things you can do:

  1. Ask the lender to remove you from the loan
  2. Seek a co-signer release
  3. Ask the primary borrower to refinance or consolidate
  4. Ask the primary borrower to sell the asset and pay off the loan
  5. Pay off the loan yourself
  6. Seek legal advice

1. Ask the Lender to Remove You From the Loan

Reach out to the lender to let him or her know that you want your name off the loan. However, the lender can’t grant this request without the consent of the primary borrower. It’s best to inform the primary borrower first before reaching out to the lender.

Whether or not this approach succeeds is dependent on some factors. First, the lender considers the primary borrower’s credit—and if he or she still has poor credit, the lender will most likely turn down your request.

Second, the lender also assesses the primary borrower’s current income to make sure he or she can bear the financial responsibility without your help.

2. Seek a Co-signer Release

Seek a co-signer release to remove yourself as a co-signer on a loan. Ask the borrower to remove your name as a co-signer.

Not all lenders agree to this, especially if the loan agreement does not permit it or the primary borrower has not been faithful with payments. It would be best to be clear about the loan terms before co-signing a loan.

However, some lenders consider a co-signer release based on how prompt the primary borrower has been making payments over a set period. The lender further assesses the primary borrower’s current financial situation and income flow relative to the loan payments.

If the lender is confident that the borrower can pay off the loan on his or her own, the lender gives you a release form to fill out. Afterward, the lender and the borrower sign the form, approving your removal as a co-signer.

3. Ask the Primary Borrower to Refinance or Consolidate the Loan

To remove yourself as a co-signer on a loan, ask the primary borrower to refinance or consolidate the loan. Debt refinancing or consolidation works more with unsecured debt such as personal loans.

In debt refinancing, the borrower only takes up a new loan—in his or her name—to offset the existing loan. The primary borrower finds a new loan with less stringent terms and uses it to pay down the existing loan, thereby getting you off the hook. You and you and the primary borrower benefit from debt refinancing. You’re free from debt, and the primary borrower stands a chance to get a more favorable payment term and fair interest.

Refinancing or consolidation is best only if the primary borrower’s credit is good enough to allow him or her to take a loan in his or her name.

4. Ask the Primary Borrower to Sell the Asset and Pay Off the Loan

Selling the asset to pay off the loan applies to a secured co-signed personal loan where the primary borrower commits an asset as collateral to get the loan. The primary borrower can choose to give his or her car, house or other physical assets as collateral. In default, the lender repossesses the asset to cover the balance.

If the co-signed personal loan is backed by collateral, talk with the primary borrower about selling the asset to pay off the loan. If he or she agrees, both of you can start the sales process. A challenge here could be realizing enough cash to offset the loan. In case the proceeds from the sales are not sufficient to offset the loan, liaise with the primary borrower to come up with the difference between the sales proceeds and the outstanding amount due on the initial loan.

5. Pay Off the Loan

Removing yourself as a co-signer on a loan becomes more accessible and faster if you pay off the loan. Talk to the primary borrower, offering to join resources with him or her to pay off the loan. If the primary borrower doesn’t have the money, pay off the loan yourself—if you can.

Better still, if you have the financial capacity, don’t bother asking the primary borrower; pay off the loan and free yourself of the financial responsibility. Although a drastic step to take, it saves your credit and gives you peace of mind. Once you pay off the loan, ask the lender to close the account.

6. Seek Legal Advice

A legal practitioner can guide you in choosing the best way to remove yourself as a co-signer on a loan. Co-signing a loan is a legally binding agreement that epitomizes your commitment to share the responsibility with the primary borrower when it comes to repaying the loan on time and in full.

Consult an experienced attorney so you can make an informed decision on the best method for removing yourself as a co-signer on a loan.

Conclusion

The hard truth is that removing yourself as a co-signer on a loan is not always as easy as it sounds—or perhaps as you might have thought. Make sure you get the facts clear—the risks, that is—before co-signing a loan.
However, removing yourself as a co-signer on a loan is not impossible; you need to know the right steps.

Ask the lender to remove you from the loan, go for a co-signer release, and ask the primary borrower to refinance or consolidate. You can also ask the primary borrower to sell the asset and pay off the loan—or take steps to pay off the loan yourself. Seek legal advice to know the best path to take.

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