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Sometimes, the primary borrower on a car loan can’t keep up with the payments, or perhaps there’s been a relationship change that affects the loan. In these situations, it’s normal to ask, “Can a cosigner take over an auto loan?”
Usually, a cosigner can’t automatically become the primary borrower. The cosigner’s role is simply to make the payments when the primary borrower can’t (or won’t). However, it may be possible to change the loan to make the cosigner the primary through auto loan refinancing or a loan transfer with the lender’s approval. Learn more about the roles of each person in a car loan and the process to change them.
First, it’s important to be clear about the difference between a primary borrower and a cosigner. The primary borrower is the person who is legally responsible for repaying the car loan. It’s their loan and their vehicle. The primary borrower is usually the owner of the car.
In contrast, the cosigner is someone who adds their name to the loan, often to help the primary borrower qualify. The cosigner agrees to be liable for the loan if the primary borrower does not make the required payments. However, being a cosigner does not grant you any ownership of the car.
A car loan is a legal contract spelling out the responsibilities of each party. Therefore, the cosigner can’t just take over the loan, as that’s not their role.
So how can a cosigner become the primary on a car loan? Typically, it requires refinancing. The cosigner refinances the car loan into their name and take it over that way. This is an option if the primary borrower can’t (or doesn’t want to) continue making payments.
Refinancing cosigned auto loans creates an all-new loan, not a transfer of responsibility from the primary borrower to the cosigner.
In order to refinance as the primary borrower, the person currently acting as cosigner will need to complete a new loan application on their own. Here’s how refinancing without a cosigner works.
When you’re considering whether to refinance as the primary borrower, there are some things to think about.
First, the ownership of the car will change. Cosigners are not usually named on the title; becoming the primary borrower means you’ll become the owner of the vehicle, too. That will affect your car insurance and will typically require paying new registration and title fees.
Secondly, refinancing can affect credit for both the original primary borrower and the cosigner. The original loan will end, which could impact the credit score of the original primary borrower when it changes their credit mix.
Finally, the payment for the new primary borrower could change. Since they’ll need to apply for a new loan with different terms, they may qualify for a different interest rate. A higher rate or different loan terms could mean a higher or lower payment.
If your main goal is to remove or replace a borrower, refinancing is the most common path, but it’s not the only one.
Refinancing lets you adjust ownership, potentially lower your rate, and change who is responsible for the loan. However, there are alternatives that may suit your circumstances better.
Sometimes a car loan situation no longer works for the primary borrower and their cosigner. A cosigner can become the primary on a car loan only through refinancing.
Refinancing is a common method of removing a cosigner from a car loan because it replaces the existing loan with a new one. Always compare refinancing offers to make sure you get the best rate and terms for your needs, and make sure both the primary borrower and the cosigner understand the potential financial impact. RefiJet offers fast, easy refinancing so you can get the loan that works best for you.
Here are some common questions about how to make a cosigner into a primary borrower for a car loan.
The primary borrower is the one responsible for the car and the loan payments. The cosigner is responsible for payments if the primary borrower fails to make them, but the cosigner doesn’t own the car.
A cosigner cannot take full ownership of a car without making changes to the loan agreement and title first. A common path is to refinance the vehicle into their name and transfer the title from the original borrower.
It’s not always easy for a cosigner to be released from a car loan. You’ll either need to get approval from the lender or refinance the loan to release the cosigner.
Yes, changing the car loan can affect your credit scores. Removing someone from the loan will affect their credit mix and age of credit, which can cause a small dip to their score. However, without that additional debt, their credit score may improve with time. For primary borrowers, it’s possible that a new loan could improve their score, especially if the former borrower missed payments or made late payments.
No. The original borrower is the main applicant and owner, so the cosigner cannot change the terms of the loan.
There are some risks, yes. For example, as the new primary borrower, they now have sole responsibility for the loan. Transferring ownership can incur new costs, including maintenance and insurance costs. And if interest rates have changed since the loan was originally taken out, your monthly payment could change, too.
Before rolling over your car loan, understand the benefits and drawbacks. Discover your options on a negative equity loan.
