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Cosigner Release: Removing Your Name From a Joint Auto Loan

Posted by henry lee - 20 August, 2013


As a cosigner on a loan, you or the primary borrower may eventually decide you no longer want or need to be jointly responsible for the loan's repayment. Should you want to be removed from the loan, there are a few options that can help you achieve a cosigner release. Aside from how to obtain agreement from the other party to get off of the loan, the following information will help you navigate each step of the release process.

Loan Refinancing

The most common way cosigners are released from the loan they signed onto is through auto loan refinancing. With refinancing, the primary borrower takes out a new loan to pay off the first either with a new lender or the same one that provided the initial loan. A new financing agreement can be in one name or the borrower can find a new cosigner. This will fulfill the financing agreement you cosigned and begin a new contract for which you are not legally responsible.

Loan Modification

A loan modification can also allow a consigner to be released from a loan, but this strategy is much less common and usually involves meeting one or more specific qualifications. Every lender handles modifications a little differently; some flat out refuse to allow responsible party modifications while others only do so under certain circumstances. For example, if a cosigner dies, a loan modification would be necessary to remove the deceased’s name from the financing agreement. A divorce can affect the terms of a loan, so a modification is sometimes permitted if a married couple is going through a divorce. In this scenario, one of the names is removed from the loan so the other can retain ownership of both the debt and the asset to which the loan is attached.

Court Settlement

A judge's decision in a court hearing can also release a cosigner from a loan. A civil lawsuit regarding responsibility for repayment of the loan, ownership of the asset, or both can be initiated by either party named on the financing agreement. Should the judge decide to release the cosigner, a settlement order is issued to the lender, and this initiates a modification of the loan’s terms. This course of action is most commonly included within divorce proceedings.

The cooperation of whomever is named on a loan with you is the most important factor in achieving a cosigner release. If you are unable to get released from a loan by using modification or refinancing, a civil lawsuit may be required to remove yourself from a financing agreement.

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Topics: Car Financing

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