How to Remove Yourself as a Cosigner on a Loan

You usually can’t remove yourself from a loan you cosigned. The lender has to agree, and lenders rarely do because it means one less person to collect from.

The realistic way out is to replace the loan: the primary borrower refinances it alone, qualifies for a cosigner release, or the loan gets paid off. Until one of those happens, the loan counts as your debt on your credit report and when you apply for credit of your own.

Can you remove yourself as a cosigner on a loan?

Not on your own. When you cosign, you agree to repay the loan if the borrower doesn’t. You can end up paying up to the full amount, and the lender can come after you without trying the borrower first.

Because the lender is counting on two people to repay, it isn’t likely to release you. Most ways out need the primary borrower’s cooperation and the lender’s approval.

Have the primary borrower refinance the loan

If the borrower can qualify on their own, they take out a new loan in their name only and use it to pay off the one you cosigned. Your account closes as paid. If the borrower’s credit or income has improved since the original loan, this is usually the cleanest exit.

Ask the lender for a cosigner release

A cosigner release removes you from the loan once the borrower meets the lender’s conditions. Not every loan has one. You’ll see it from some lenders, most visibly private student lenders, and only the borrower can apply.

Sallie Mae offers it on some of its loans. To qualify, the borrower must:

• Have reached the age of majority in their state
• Show proof of graduation (or of finishing a certification program), proof of income, and U.S. citizenship or permanent residency
• Have made 12 on-time principal and interest payments on each loan they want you released from (or have paid ahead)
• Have no payments 30 or more days late, and no hardship forbearance or modified repayment plans, in the past 12 months
• Pass a credit review, with no bankruptcy, no foreclosure, and no student loans in default or 90 days late in the past 24 months
• Show they can handle the loan alone

If your loan doesn’t mention a release, ask the lender anyway. A lender might add a release option if you ask, though it’s easier to get before you sign.

Ask about a loan assumption

With an assumption, the lender lets the primary borrower take over the loan alone, keeping its current rate and terms. Most loans don’t allow it. Some mortgages do, and the borrower still has to qualify with the lender.

Pay off the loan

If you and the borrower can pay the remaining balance together, the loan closes and your obligation ends. On a small balance, splitting the payoff may cost less than staying on the loan for years.

Sell what the loan paid for

On a secured loan, like a car loan, the borrower can sell the car and use the money to pay off the loan. If the car is worth less than the loan balance, the sale won’t cover it, and you and the borrower will still owe the difference.

Read more >> How to Remove Your Name From a Joint Credit Card

If none of these work

You stay on the loan, so set it up so a missed payment doesn’t catch you off guard. Ask the lender to:

• Agree in writing to tell you if the borrower misses a payment.
• Send you the monthly statements.

Then you can step in before a payment is 30 days late. Lenders generally report a payment as late at that point, and it can show up on your credit report as well as the borrower’s.‍

‍If you’re being asked to pay

Talk to a licensed attorney if the borrower has stopped paying, you’re going through a divorce, or a lender is threatening to sue. Your rights depend on your state and on what you signed, and a cosigner’s window for options closes once collection starts.

Talk to a nonprofit credit counselor if the payments are manageable but hard to fit into your budget. The National Foundation for Credit Counseling offers free or low-cost counseling at 800-388-2227.

Bottom line

You’ll usually get off a cosigned loan only when the loan itself is replaced or paid off, and that depends mostly on the borrower. In the meantime, part of your credit history depends on payments you don’t make. The Kikoff Credit Account adds history that depends only on you. There’s no credit check to sign up, plans start at $5 a month, and your on-time payments are reported to Equifax, Experian, and TransUnion.