A Way Out

Some methods for removing yourself as a co-signer to a loan

It’s no small thing to be asked by a loved one to co-sign a loan. There are plenty of things you need to consider before signing, because what happens with that loan ends up happening to you. If the borrower fails to make payments, your credit will take a hit. If the borrower tries to jump ship completely, it’s up to you to remain afloat despite being saddled with new debt. Then there’s the question of how you end things with the borrower. Once the borrower is able to handle the loan on his or her own, you’re going to want to get yourself removed as co-signer. How exactly do you do that?

Get a release. One way to remove yourself as a co-signer is to request a co-signer release. This option is typically available after the borrower has made a few consecutive payments and demonstrated their ability to repay the loan themselves. To get started, head to the Consumer Financial Protection Bureau’s site for a sample co-signer release letter you can use. Fill that out, then contact the lender to ask about the specifics of their removal process.

Refinance the debt. Another method of removing yourself is to refinance or consolidate by paying off the existing debt with a new loan that has its own new terms. This would be a great move if your borrower has made financial progress and could qualify for the loan independently. To get them in agreement, explain to the borrower that this is a chance to get a better interest rate or an opportunity to stretch out the loan payments and reduce them if the current ones are too much to bear alone.

Remove the asset. As US News reports, this is a good option if you’re the co-signer on a car loan. To remove yourself from the loan, simply sell the vehicle. If you’re on the hook for a leased car, you could try to have the lease swapped out by using a site like Swapalease. This site locates someone willing to take on the lease, and thus you’d be free from the loan. As with all of these options, you’ll need to have your borrower on board. That’s something to consider way before you sign: Your relationship will be close when you co-sign, but will it remain that way when you want to leave?

Chris O'Shea

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