Can You Add a Co-Borrower to Refinance an Auto Loan?

Refinancing an auto loan can encompass any number of strategic changes to a contract, including adding a co-borrower. In order to add a new name to your loan, you will have to cancel the current contract and arrange a new one. You will need to submit a new application to your lender listing the additional borrower, and some of the terms of your loan may change.

Car Loan Terms

Lenders consider your application when setting the terms for your loan. If you are a low-income borrower, they may extend your loan longer to create smaller monthly payments. If you have bad credit, they may apply a higher interest rate to your debt. When you apply with another borrower, the factors the lender used to determine your terms change. This means your loan will change as well, and it can change either for the better or for the worse.

Getting a Better Loan

Adding a borrower can have many positive effects on your loan. The borrower's income is used in addition to your own to determine your loan limit and monthly payments; this means you can typically afford a higher payment each month. Adding a borrower also gives the lender more security in the loan. As such, you may find a lower interest rate by adding a borrower. However, since lenders generally dislike changing contract details, you may find some penalties or fees applied to your refinance. Always negotiate these fees down using the factors in your favor to get a better deal.

Refinancing Process

To initiate the process of adding a borrower, start by contacting your current lender. Explain what you would like to do, and ask if you can apply for a refinance. If you have recently been married, most lenders will allow this process and even make it easy for you. You will fill out a joint application, and, unless your spouse has very low credit, you should have no problem. If you are adding another person, such as a boyfriend or girlfriend, the lender may be more skeptical. Lenders do not want you to enter a contract with an individual who may not be in your life for very long as this can create complications in the future. In this case, you may face more fees and penalties to add the additional person.

Co-Borrower vs. Co-Owner

It is important to remember the distinction between co-borrower and co-owner. By adding a person to your loan, you are only joining your debt. You do not share ownership in the vehicle. You must add the person to your title to do this. If you only want to share ownership but not debt, you can easily add a second person to your title directly at your Department of Motor Vehicles.