How To Remove Yourself As A Cosigner On A Loan

Bryan
Author:
Bryan
Bryan Daly
Expert Contributor at Loans Canada
Tony
Reviewed By:
Tony
Tony Dong, MSc, CETF
Expert Contributor at Loans Canada
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Updated On: April 21, 2025
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Are you regretting cosigning a loan? Or do you simply want to get all the facts before cosigning for a loan? Whatever your situation, it’s important to understand the risks that come with this role, including whether or not you can remove yourself as a cosigner.


Key Points

  • A cosigner is someone who backs a loan and agrees to cover payments if the primary borrower fails to pay.
  • Whether you can remove yourself as a cosigner ultimately comes down to the lender’s discretion.
  • If the lender does not release you from the loan agreement, you may employ other methods to get out of the contract, including refinancing, paying off the loan faster, or selling the asset.

Can You Remove Your Name From A Cosigned Loan?

Remember, by cosigning a loan, you’re contractually agreeing to take over someone’s payments if they can’t afford them. That can make it tough to get out of your contract, especially if the original borrower has a large unpaid balance. Currently, there’s no set procedure to get removed as a loan cosigner. It’s all up to the lender. 

Whether they’re a bank or private company, most lenders won’t let you off the hook until they’re sure the primary borrower can handle the payments alone. To get the lender to remove you as a cosigner, the primary borrower will have to prove their finances are strong enough to cover their payments on their own. 

What Is A Cosigner? 
A cosigner is someone with a strong financial and credit profile who agrees to take responsibility for making payments on a loan alongside the primary borrower. If the borrower fails to make payments, the cosigner must take over.
The cosigner must have a robust financial and credit profile.Having a cosigner increases the probability that the lender or creditor will get their money back in case the person receiving the loan is unable to pay it off.

Ways To Remove Yourself As A Cosigner

Here are a few of the ways you can go about removing yourself as a cosigner.

Refinancing The Loan

If you want to remove yourself as a cosigner, you can ask the borrower to refinance their loan in their name only. When they refinance, they can change the terms of the loan agreement, including removing the cosigners and possibly even reducing their interest rate. 

Refinancing can be a great option because it can not only remove your name as a cosigner, but it can also lead to lower payments and a reduced rate, if the primary borrower qualifies. This can be applied to most types of loans and is the most favourable option, especially for loans with large balances.

Keep in mind, however, that the primary borrower will need to qualify for a refinance on their own without the help of a cosigner this time around. As such, the primary borrower will need to have relatively strong credit and income to be eligible for a refinance. This may not be the case if they have defaulted.

Learn more: How To Refinance A Personal Loan

Note: Unless your loan contract has a clause that says you can repay your loan early without penalty, most lenders will charge an early repayment penalty fee to cover the interest income they lose. The exact penalty fee will vary based on the loan type. Be sure to find out what this penalty fee is and do the math to ensure the savings from refinancing outweigh these additional fees.

Ask The Lender To Remove You As A Cosigner

If you want to remove yourself as a cosigner before the loan has been fully paid off, you can try asking the lender to remove you as the cosigner. Some lenders may be willing to do so if the primary borrower can show that they can handle the loan on their own. 

The primary borrower can help strengthen their credit and finances with the following: 

  • Improve Credit– The borrower can continue making their bill payments on time, keeping their credit card utilization low and avoid applying for new credit for a while to help build their credit.
  • Pay Off Other Debts – If the borrower pays down their debt, it’ll lower the borrower’s debt-to-income ratio, which may make the lender more willing to remove you as a cosigner.

Sell The Financed Asset

When the loan is secured against an asset, like a house or car, the borrower could try selling it to repay their debt. Once the loan is fully repaid, the cosigner is off the hook.

However, this option also means the primary borrower will lose their asset. Whether it’s a car, house, or other valuable asset, they’ll have to give it up in order to release you of your cosigning obligations. While selling the asset may be a more direct and simplified way to get you off the contract as a cosigner, it’s a big decision that could leave the primary borrower with serious consequences if they still need that asset.

That said, it may be a wise decision if the primary borrower is no longer able to make regular loan payments. However, don’t be surprised if they refuse to use this option.

Pay Off The Loan Faster

If you want to be removed as a cosigner for personal financial reasons, you can ask the primary borrower if there’s some way they could pay off the loan faster. This may be through lump-sum payments, more frequent payments, or higher payments. 

However, this may be hard to accomplish if there’s a large balance remaining, especially if they are on the verge of default.

Close The Account

If the borrower hasn’t been able to make payments for a while and hasn’t improved their credit rating enough to refinance the loan into a more affordable payment plan, it may be time to close the account. 

Secured Loan

If it’s a secured loan, consider the following options:

  • Selling The Asset. You can speak to the lender about selling the asset and using the proceeds of the sale to pay off the loan. That way, you can close the account and remove your name as cosigner.
  • Loan Assumption. Alternatively, the buyer may take over the loan, as long as the lender approves. Also referred to as a ‘loan assumption’ or ‘loan transfer’, this option may be available to close the account once the loan is repaid. Then, your name will be off the loan. However, keep in mind that this is subject to lender approval and the buyer’s creditworthiness.
  • Voluntary Repossession. In this scenario, the borrower would willingly give the asset back to the lender to avoid the more harsh consequences of an involuntary repossession. While voluntarily surrendering an asset, like a car, can still have negative consequences on the borrower’s credit, it can still help avoid the costs of having an asset seized involuntarily or ruining their reputation with the lender.

Unsecured Loan

If it’s an unsecured loan, you may need to pay or transfer the balance, but it may be worth it to remove your name. For example, in the case of a borrower being in default with a personal loan, the lender may agree to settle the debt for a lesser amount than what is truly owed. However, this situation may still require someone — including the cosigner — to make an upfront payment to close out the account. 

Find A New Cosigner 

You can also ask the primary borrower if someone can replace you as a cosigner. If they do, they’ll have to refinance it with the new cosigner. Finding a cosigner who’s more comfortable taking over another person’s loan payments when necessary may be the easiest solution for the borrower. 


Can The Primary Borrower Remove You As A Cosigner? 

Unfortunately, the original borrower cannot simply take your name off their loan contract. However, there are a few strategies they can pursue to reduce their financial obligations and help you exit the loan as a cosigner:

Consolidate Their Debt

When all else fails, the borrower could cut their losses and repay their debt. If that’s impossible, maybe they can apply for a debt consolidation loan, enter a debt management program, or have their debt settled to remove you as a cosigner. 

Debt consolidation combines multiple debts into one loan with a lower interest rate and better loan terms, potentially reducing monthly payments and saving the borrower money. However, if consolidation isn’t an option due to the borrower’s poor credit or insufficient income, a debt management program or settlement may be considered, but these may affect the cosigner’s credit score.

Refinance Their Loan 

Depending on what type of loan they have, the borrower may be able to take out another loan to replace their first, known as refinancing. Refinancing can lead to a more affordable payment plan by extending the loan term and securing a lower rate. 


What Happens If You Can’t Remove Yourself As A Cosigner? 

If your lender won’t let you or the borrower out of the loan contract, you’ll have to look into the following options to remove yourself as cosigner: 

  • The primary borrower refinancing the loan by themselves
  • The primary borrower finding a new cosigner
  • Selling the financed asset
  • Transfer the loan to someone else
  • Paying off the loan
  • Closing the account

If none of the available options are viable, you’ll have to work with the primary borrower to keep the account in good standing. While it can be expensive and inconvenient, it’s better than letting the loan payments pile up until they ruin both your bank accounts and credit scores. This is the inherent risk with co-signing any loan.

Learn more: Should You Cosign A Loan? The Good And The Bad


Does Cosigning Affect Your Credit?

Your credit score may be either positively or negatively affected if you’re a cosigner, depending on how the primary borrower handles the loan.

Can Cosigning A Loan Negatively Affect Your Credit? 

Being a cosigner on a loan can have a negative effect on your credit score for the following reasons:

  • Hard Credit Check: When the lender performs a hard credit inquiry when the borrower applies for the loan, this can cause your credit score to dip.
  • Late Or Missed Payments: If the primary borrower misses the payment due date by at least 30 days, this late payment may be reported to the credit bureaus. If this happens, it may be recorded on your credit report and can pull your credit score down too.
  • Asset Repossession: If the loan is secured by an asset, such as a car or house, the asset may be seized by the lender if the primary borrower defaults. Again, this incident may be noted on your credit report and can drag your credit score down.
  • Account In Collections: If the primary borrower misses several loan payments, the lender may involve a collection agency to go after the missed payments. If you’re a cosigner on the loan, a collection account may also be opened on your credit report, which can hurt your credit score.

Can Cosigning A Loan Help Improve Your Credit? 

Fortunately, your credit score can also be positively affected as a cosigner on a loan if it’s kept in good standing. That means bill payments must be made on time every month. Timely payments are reported to the credit bureaus, which will show up on your credit report. 

Learn more: Does Cosigning Affect Your Credit?


When Is A Cosigner Needed?

Cosigners are usually required when the person applying for the loan:

  • Has a poor or no credit history
  • Has a low credit score
  • Doesn’t have the minimum income required
  • Is unemployed
  • Is self-employed
  • Is a student with an inadequate credit history

Most of these situations represent a high level of risk for the lender. A cosigner helps take away part of the risk and increases the likelihood of approval. The cosigner becomes responsible for any payments that are not made.


Final Thoughts

It may be possible to remove your name as a cosigner, but it can be very difficult if the lender doesn’t permit it without employing other methods, like refinancing. Being a cosigner is very risky. If you don’t know or trust the person well, do not cosign. You don’t want to be responsible for somebody else’s debt, as you could lose money and your credit may be negatively affected. Despite how important it may be for the borrower, always think of your financial needs first.


How To Remove Yourself As A Cosigner FAQs

Who can be a cosigner?

Anyone who is the age of majority (18 or 19), can afford the loan payments, and has a solid credit history can be a cosigner, though exact requirements may vary. Applicants with good incomes, credit scores (660 – 900) and good payment histories usually have less difficulty qualifying. 

How will I know if the cosigned loan is being paid on time?

If your finances and credit seem healthy, it’s probably safe to say the borrower is paying their loan. That said, be sure to check your credit report often, since missed payments will appear as negative marks on your payment history and potentially hurt your credit scores.  

Will I become responsible for the loan if the person I cosigned for declares bankruptcy?

Cosigners aren’t always protected if the borrower goes bankrupt. While certain bankruptcies offer some security for the cosigner during the court case, others can end in them being held responsible for the full debt. Even if the borrower negotiates a lower payment, their lender may assign the rest of their debt to the cosigner.   

Will my credit be affected by cosigning a loan?

It depends on how the payments are made. A record of the loan will show up on your credit report and, if the borrower pays their loan, you may see improvements to your credit scores. However, the opposite may occur when they miss payments. So, if the borrower can’t afford their debt, it might be safer for everyone if you take over. 

Can I remove myself as a cosigner?

By negotiating with the lender, you may be able to remove yourself as a cosigner. However, once you’ve signed a contract, there’s no guarantee. If the borrower gets behind on their payments on a large loan, the lender may hold you responsible.

Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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