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That seven-word question — “Can a cosigner become the primary borrower?” — is more complicated than you may think. But yes, a cosigner may become the primary borrower on a car loan through reaching an agreement with the lender or refinancing the car loan. Below we’ll dissect the parts and highlight how a cosigner may become the primary borrower on a car loan.What Is an Auto Loan Cosigner?
An auto loan cosigner is an individual — usually a friend, partner, or family member — who cosigns a primary borrower’s auto loan contract. A creditworthy cosigner can help a primary borrower get approved for auto loan financing. The cosigner doesn’t have ownership of the vehicle but agrees to accept financial liability if the primary borrower falls behind on loan payments.Why would a primary borrower seek a cosigner? A primary borrower with bad credit may need a creditworthy cosigner to get approved for a car loan. Or a primary borrower with good credit may need a cosigner with excellent credit to qualify for a lender’s lowest annual percentage rate (APR).If you have bad credit, no credit, or fair credit, a creditworthy cosigner can help you get approved for car loan financing that’s right for you. The cosigner is legally responsible for meeting the financial obligation of the loan if the primary borrower doesn’t make the payments and, if payments are made late or the primary borrower defaults on the loan, this can damage the credit scores of both parties.If you are more than 30 days past due or delinquent on your car loan payment, lenders may report the delinquency to all three major credit bureaus.Ways a Cosigner Can Become the Primary Borrower
As a cosigner, you’re financially guaranteeing that the loan payments will be met on time and in full. If the primary borrower wants to explore how you, as cosigner, may become the primary person on the loan, talk to your current lender. This may involve the loan being refinanced and taking the name of the cosigner. More information about refinancing is found below.Can a Cosigner Take Possession of the Car?
If the primary borrower isn’t keeping up with loan payments, can the cosigner take possession of the car? The answer is no, the cosigner has no legal right to take possession of the car. As a cosigner, you don’t have legal ownership rights to the vehicle. In other words, a cosigner is on the vehicle’s note (making them liable for the payments) but not the car title (which indicates ownership).As a cosigner, you don’t have ownership rights to the vehicle so you can’t repossess it from the primary borrower. (However, if you were a co-borrower, it’s possible that you could jointly own the vehicle with the other borrower.)Can a Cosigner Sue the Primary Borrower for the Entire Amount of a Loan?
One option that’s available: A cosigner does have the right to sue the primary borrower to recover the funds spent making loan payments. It will then be up to the court to decide whether to award any damages to the cosigner. When deciding whether to sue, take court costs into account.What Happens When a Cosigner Sues the Primary Borrower?
As a cosigner, you may decide to file a lawsuit to recover the funds you paid toward the car loan. If you had the primary borrower sign a separate agreement where he or she agreed to meet the payments, your lawsuit could potentially also have a focus on breach of contract. Plus, if the lender sues you, then you can file a suit against the primary borrower to claim that they, not you, should satisfy the lender’s payment requirements.The Rights of the Primary Borrower on a Car Loan
The primary borrower has the ownership rights to the vehicle. The cosigner does not. This is the case whether the borrower bought the car from a dealership or from a private seller using a private party auto loan.The Rights of the Cosigner
When cosigning a loan, the person is taking on responsibilities rather than rights. The cosigner is responsible for making payments if the primary borrower doesn’t, and this doesn’t give the cosigner rights to the vehicle. As noted above, cosigners do have the ability to sue the primary borrower and the court will decide the outcome.Can a Cosigner Be Removed from a Car Loan?
It’s possible to remove a cosigner from an auto loan. One of the simplest ways to proceed is to ask the lender whether the loan comes with a cosigner removal option that can be exercised when the primary borrower can qualify for the loan by themselves or other conditions have been met.If this is a possibility, the lender may require the cosigner to sign a release form. If the relationship between the primary borrower and cosigner is a good one, this may be a simple process. After all, being taken off a loan can help the cosigner because they would no longer be responsible for the car payment. If it’s part of a contentious divorce or other situation where the relationship between the two parties is now poor, this process may be more complicated.Ending a Cosigned Car Loan
Other ways exist to end the existence of a cosigned car loan. Here are the most typical: - Pay off the loan
- Refinance
- Voluntary surrender
- Sell the car
Here’s more information on each option:Pay off the Loan
If the cosigner is financially able and willing to help the primary borrower make payments, then this can be the most straightforward approach. Once that loan is paid off (either through regular payments or in a lump sum), then the cosigning situation automatically ends.Refinance
If the primary borrower successfully goes through the auto refinance process on their own merits, then the cosigned loan would be replaced with the new one. This is one of the more typical ways to remove a cosigner from a vehicle loan.Recommended: When Should or Shouldn’t You Refinance a Car Loan?Voluntary Surrender
If the primary borrower can’t make payments, the lender has the option to repossess the vehicle. This can come with plenty of costs and, if the primary borrower can’t pay, the lender can come after the cosigner. Willingly giving up the vehicle can save time, money, and hassle. Sell the Car
If the primary borrower struggles to make payments and refinancing is not a viable option, then selling the vehicle can be worth considering. The borrower could sell the car, pay off the cosigned loan, and use whatever is left to purchase a more affordable vehicle. Auto Refinancing Options
If you’re considering the auto refinance process and its typical timeline, here’s more about how auto refinancing works. Steps include:- Collect the documents you’ll need, including information about your vehicle, the current loan, auto insurance, and your income and employment details.
- Shop around, compare rates, and consider refinancing with the same lender if your current lender offers terms that are right for you.
- Apply for the auto refinance loan with the lender of your choice.
- Seek a cosigner if you’re interested in refinancing your auto loan with a cosigner.
- Once the loan is approved, the lender will pay off the old loan and future payments go to the new one under the new rate and terms.
The Takeaway
Cosigning a loan comes with plenty of responsibility and can raise questions about your rights, along with how to have your name removed from the loan, and much more. If you have specific questions about your situation, seek legal advice.If you’ve decided to explore auto refinancing, you can fill out one convenient application at Lantern by SoFi to compare offers from different lenders. Lantern can help you find auto refinancing that’s right for you.Compare auto loan refinance rates with Lantern. Photo credit: iStock/PeopleImages
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About the Author
Kelly Boyer Sagert
Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.
