Auto Loan Cosigners: Can a Cosigner Become the Primary Borrower?

Kelly Boyer Sagert

Updated January 12, 2022

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That seven-word question–“Can a cosigner become the primary borrower?”-- is more complicated than you may think. In this post, we’ll dissect the parts and offer answers, defining what a cosigner is, what this means to both parties (the primary borrower and the cosigner) and more.

What Is an Auto Loan Cosigner?

If someone wants to buy a car but struggles to find financing, they (the “primary borrower”) may ask a friend or family member to also sign the loan papers. This means to “cosign.” What are the common reasons for a problem with getting financing? The primary borrower may have had a hard time getting financing on their own because of low credit scores, a lack of established credit or because of low income.The auto loan’s 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.

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 take the name of the cosigner. More information about refinancing is found below.

Can a Cosigner Take Possession of the Car?

You may wonder if you can take possession of a car you cosigned for, perhaps because the primary borrower isn’t keeping up with the payments. The answer is you can’t. 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 title (which indicates ownership).

Taking Possession of a Car You Cosigned For

But can a co-buyer ever take possession of the car? For the purposes of this article, we’re focusing on cosigning rather than other ways in which someone could be the co-buyer or co-borrower. As a cosigner, as mentioned above, 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 damages to the cosigner and if, so in what amount. 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 towards 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.

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?

Yes, it is possible to remove a cosigner from an auto loan and we’ll list several ways to end the cosigner relationship on a loan. One of the simplest ways to proceed is to ask the lender if the loan comes with a cosigner car loan 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
Loan deferment
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.

Loan Deferment

With a deferment, car payments can be paused for a short period, perhaps one to three months. This gives the borrower time to address the financial issues that make it challenging to make timely payments. The lender would need to agree to the deferment.

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.

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 refinance 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 for the best financial institution; if happy with the current one, also investigate current rates and terms at the same lender. Compare the interest rates and APRs; fees; application process; customer service; and so forth. You can also investigate private auto loans.
Apply for the loan at your lender of choice.
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.

You can also refinance auto loans with a cosigner.

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 car loan refinancing, you can fill out one convenient application at Lantern to SoFi to receive offers from many partners.

Photo credit: iStock/PeopleImagesThis article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC112207

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.

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