Refinancing essentially involves getting a new loan with different terms. It's possible to refinance an auto loan without a co-signer, even if your payments aren't up-to-date. However, it's important to determine if refinancing will improve your financial situation before you sign on to a new loan to avoid taking on more debt than you can afford.
Affordability
Some lenders will allow you to refinance your auto loan without a co-signer to lower your monthly car payment if the payment is no longer affordable for you. However, you must give your lender details about your financial situation, including the reason you can no longer afford the monthly payment. Lenders sometimes prefer to refinance loans to prevent borrowers from falling behind on payments. The refinanced loan may include a lower interest rate, especially if your credit rating has improved since you originally took out the loan. A lender also may extend the loan period for the remaining balance of the loan to lower your payments.
Repossessions
You may be able to refinance an auto loan without a co-signer even if you're at risk of having your vehicle repossessed. The Better Business Bureau notes that auto repossession often costs lenders several thousand dollars, so your auto lender may be willing to refinance your loan even if you're already behind on payments to avoid a repossession. This option will likely work best if you contact the lender to explain your financial situation instead of accruing late payments and avoiding the lender's collection calls.
Removing Co-Signers
Refinancing is usually required if you want to remove a co-signer from an auto loan. Your chance for getting your lender to agree to remove the co-signer is greater if you have made payments on time each month since taking out the loan. Contact other lenders to find out if they will refinance your loan based solely on your creditworthiness if your current lender refuses to do so. Watch out for interest-rate changes in this scenario that could make monthly payments on your new loan unaffordable. Some lenders may only agree to refinance your loan without a co-signer if you pay a higher interest rate on the new loan.
Considerations
It's worth the trouble to shop around for a lender who will refinance a co-signed auto loan if its unaffordable. Your lender could require you to pay off the balance on your loan along with other fees if the lender has to repossess your vehicle. In such cases, you would continue to pay for a vehicle you no longer own, and the repossession would damage your credit score as well as your co-signer's score. The lender also could require your co-signer to pay off the loan.
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