Many times, a spouse, parent or close friend will co-sign an auto loan for another borrower to help the borrower qualify for the loan. A clear cut "yes" or "no" answer on whether or not a lender will drop a co-signer from a loan before it is paid off is not possible, as it is up to the individual lender to make that decision based on the circumstances specific to the loan, including the borrower's current financial standing and credit rating.
What Is An Auto Loan Co-Signer?
An auto loan is a binding contract that is drawn up between a lender and a borrower. If a borrower is considered high-risk, he can ask a third party to co-sign on the loan. A co-signer, or co-maker, is a person who signs a promissory note and legally assumes equal responsibility for an auto loan. Once all the parties agree to the terms and conditions of the auto loan, it is considered legal and binding.
Opt to Keep the Original Auto Loan
If you want to be removed as the co-signor, contact the lender by phone or write a formal letter requesting that your name be removed from the auto loan. The lender can approve or deny this request for any number of reasons. For example, if the other borrower has a higher credit score or has had an increase in income, you can argue that your attachment to the loan is no longer necessary, as the other borrower now qualifies for the loan on his own accord. Using this scenario, the original loan contract would stand, but your name would be removed and you would no longer be held financially responsible for the repayment of the loan.
Option to Refinance the Auto Loan
If a lender refuses to remove your name from the auto loan, and the other borrower has improved his financial strength to such a degree that he can refinance the auto loan without adding your name to the contract as a co-signer, you can ask to be dropped from the original loan. Through a process known as refinancing, the other borrower, if she agrees, can apply to refinance the auto loan under a new control and possibly at a lower interest rate.
Considerations
In most cases, you can take legal action against the other borrower on the auto loan if she has defaulted on the auto loan, refuses to repay the auto loan or has mislead you, the co-signer, in some way regarding her intention or ability to repay the auto loan amount. Contact a lawyer to make a determination about the merits of your request to force the sale of the car in a court of law.
Warning
A lender has a legal right to refuse any manipulation of an original auto loan contract. The credit worthiness of the other borrower will ultimately determine how the lender responds to your request to drop your name from the loan. Be prepared for the lender to say that the loan must be paid in full before any party can have his named "removed" from the loan.
0 comments:
Post a Comment