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How to Remove Yourself as a Cosigner on a Loan

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How to Remove Yourself as a Cosigner on a Loan

Written by Caitlin Wood

How to Remove Yourself as a Cosigner on a Loan

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Cosigner Loan Personal Finance

When applying for a loan, you may need to have a cosigner or guarantor, depending on your lender or creditor and their terms. A cosigner is somebody who signs an official document, like a loan agreement, with another person. They take equal responsibility for the loan and the cosigner understands that when he signs, he becomes liable for the full amount owed. 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.

Cosigners or guarantors 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.

What Happens when your Co-signer Declares Bankruptcy? Read this.

Let’s say you cosign a friend’s or family member’s loan and then after a few months start to regret your decision. Here are a few of the ways you can go about removing yourself as a cosigner.

  1. Refinancing

If you want to remove yourself as a cosigner, the borrower must refinance their loan to change the terms of the loan agreement. You can refinance between each term throughout the duration of your loan. Changes include removing cosigners and possibly even reducing their interest rate. This will decrease the borrower’s monthly payments, thus helping them pay off the loan faster. This can be applied to most types of loans and is the most favorable option, especially for loans with large balances.

  1. Improve Borrower’s Credit Rating

If you want to remove yourself as a cosigner before the loan has been fully paid off, the borrower needs to improve their credit rating so they handle the loan on their own. To help the borrower improve their credit rating, they can implement the following steps:

  • The borrower should pull their credit report (for free once a year).
  • Discover which problems are impacting the borrower’s credit rating, did they miss a payment? Is their credit score too low?
  • The borrower should concentrate on one or two issues and develop a plan that can help them improve their credit rating.

Keep in mind that this option may be difficult to accomplish. The reason you had to cosign the borrower’s loan in the first place was that they didn’t have good enough credit to get approved on their own.

  1. Pay off the Loan Faster

If you need to be removed as a cosigner on a loan because of your own financial needs, you could kindly ask the borrower if they could make extra payments in order to pay off the loan faster.

  1. Sell the Financed Asset

If you have cosigned for a secured loan, such as a car loan, you could ask the borrower to sell the asset. If the borrower is unable to make his payment, they could sell the car and pay off the loan completely. Thus, you would no longer be a cosigner.

  1. Close the Account

If the borrower hasn’t been able to make payments for a while and still hasn’t improved their credit rating enough to be approved for a new loan or credit card, it may be time to close the account. Even though you’ll need to pay or transfer the balance, it may be worth in order to remove your name.

Need more information about what it means to co-sign a loan? Click here

As you can see, even though it’s impossible to remove your name as a cosigner, being a cosigner is still very risky. If you don’t know the person well, do not cosign. If you don’t have full trust in the person, do not cosign. If the borrower has lost their job but really needs a loan, do not cosign. These are all simple examples that can leave you in debt for years. You do not want to be responsible for somebody else’s debt, as you will lose money and your credit score could be negatively affected. Despite how important it may be for the borrower, always think of your financial needs first.


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