Can a Co-Signer Refinance a Car?

As a cosigner, you can refinance a car loan in your own name as long as your credit is good enough to obtain a loan approval. If your credit has suffered since your original loan, refinancing might not prove worthwhile. The vehicle's co-owner must agree to give up his portion of ownership before you can refinance.

Obtaining a Co-owner's Permission

The person you cosigned for, also known as the vehicle's co-owner, must agree to sign the vehicles title to release her portion of ownership. Talk to the co-owner to ensure she'll sign her name on the title. If she refuses, you can't refinance the loan. If your co-owner agrees to transfer ownership to you and your new lien holder, she'll have to sign the title as required by your state. Some states send vehicle titles to the lien holder and not the registered owner, known as a title holding state, so the co-owner may have to arrive at your old lender's establishment with you to complete the loan transfer process.

Your Current Credit Standing

Check your credit before submitting an application to refinance your loan. If you took the vehicle back from the person you cosigned for because of late payments, your credit score may have decreased. A new lender will also require that your current loan payments are up-to-date before providing you with an approval. If you find that the person you cosigned for wasn't paying payments, pay the past-due amount to bring the account current. Fix any errors on your credit report.

Refinancing Process

Check the interest rates of auto loan providers to determine where to apply for a loan. Contact your current lender to obtain a 10-day payoff quote, which includes the cost of interest added to your account daily, known as the loan's per-diem amount. Apply to the lender for the loan's balance unless you wish to provide a down payment. Also expect to provide your vehicle's identification number, mileage and features so the lender can determine its lending value. Once approved, your new lender will pay off your old loan.

Information Used to Determine an Approval

Your lender might ask you to provide a down payment if your vehicle's value is less than your requested loan amount, known as a loan-to-value ratio. Other than your credit score, your lender also reviews your debt-to-income ratio to determine the amount of debts you pay out each month in comparison to the money you have coming in. If your debt-to-income ratio is poor, your lender might require a down payment to provide a lower monthly payment. With poor credit, you won't necessarily be declined for a loan, but the lender may raise your interest rate and shorten your loan term, which can significantly increase your monthly payment.