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Can I Add Another Person to My Car Loan?

Finance | 11/19/2021 23:00

Refinancing a car loan is when you replace one car loan with another loan. The terms of your loan can change, since you are essentially starting over. This can often mean adding or removing a cosigner from your policy. If your situation has changed and you need a little help with monthly payments, or you could benefit from your friend’s excellent credit, refinancing with a cosigner might be a good idea. On the other hand, if you are looking to release your friend from that huge favor they did a few years ago when they cosigned for you, refinancing your vehicle might be a good way to remove them from the loan.

Here we will go over how to keep, remove, and add a cosigner to your car loan when you refinance.

3 persons in a car loan

What is a Cosigner?

So what exactly is a cosigner? A cosigner is a person who can sign onto a loan and be obligated to pay back the loan should the borrower have difficulties making on-time payments. They assume the same financial risk as the borrower. Having a cosigner with good credit can be beneficial in securing a lower APR and getting better auto loan deals.

How to Keep or Add a Cosigner

You originally cosigned with a good friend because you needed help with the payments (and needed an extra boost from their credit score). Rates are low now and you could use the lower car loan payments every month, so you decide you want to refinance your loan. Things are going well, and your credit hasn’t improved quite enough for you to commit to the loan entirely. Because of this, you would like to keep them on as a cosigner. 

Or maybe you originally took out your loan and it is way too much to keep up on every month. You are drowning in monthly payments, and you know refinancing will lower your monthly car loan payments and alleviate this. But your credit has taken a hit recently, and you know you aren’t getting the best rates as a result. Adding a cosigner can help you secure a better rate and more favorable terms. 

With either of these situations, you need to know how to refinance a car with a cosigner. The good news is you can easily keep or add a cosigner when you refinance. Your cosigner will simply have to meet the lender’s requirements. Here are the most common requirements to be added as a cosigner:

A Good (or Excellent) Credit Score

Great credit is the first requirement of cosigning a loan. Think of your cosigner as a safety net; should something happen to you financially, the lender is assured that there is a backup plan for payments being made on-time. A good credit score is an indication of how strong of a security net you have.

Credit scores are based on payment history, amounts owed (known as credit utilization), credit history length, credit mix, and new credit. A cosigner is only beneficial if they have good credit. A score of 670 and above is considered good, but the higher their credit score is the more helpful it will be to you.

A Good Payment History

Does your cosigner have a good history of on-time payments? Payment histories show lenders how people handle their debts. If you have a history of consistent payments, you are less of a risk to lenders. 

A Qualifying Income

Does your cosigner have a steady income? Their income needs to show that they can pay back the loan on your behalf if you are unable. 

Desire to Cosign

Do they want to help you out in this way? Becoming a cosigner comes with a lot of liability. Once they sign on the dotted line, they are responsible for the debt if you should default. 

A Clean Background Check

Lenders will often use background checks to determine the liability of a cosigner. They will specifically look for financial issues, including evictions, repossessions, and financial fraud.

How to Remove a Cosigner

Now let’s look at how to remove a cosigner from a car loan. Has your credit improved significantly since your original loan, and you no longer need the help of another person? Maybe you want to reduce the risk for a loved one who was helping you out in a time of need. Whatever the reason, you are ready to remove them as cosigner.

There are three ways to remove a cosigner from your loan, but refinancing is certainly the most popular.

Try to Remove them From Your Existing Policy

Read your contract carefully and closely and see if there are any provisions that will allow the cosigner to be released from responsibility. This is very unlikely, as cosigning is put in place specifically to make it difficult for one person to back out. But it is worthwhile to look through your contract if you are thinking about it.

Pay Off the Loan

If you pay off the loan entirely, you will remove the cosigner automatically. This may not be a practical solution however if you are not in the position to do so. 

Refinance and Remove the Cosigner

This is the most popular and easiest way to remove a cosigner. Since refinancing is replacing one loan with another, you are essentially paying off the original loan and starting over. Before you decide to do this, check on the following:

  • Your Credit Score. Is your score in good or excellent standing? If it is still not in good standing, expect to pay higher interest rates if you drop your cosigner.

  • Your Cash Flow. Are you able to make the monthly payments every month? Do not remove your cosigner if things will still be very tight. Falling behind on payments will be detrimental to your credit and can result in you losing your car.

  • Your Current Loan. Are there prepayment penalties if you pay off your loan?  If the penalties are high, it will negate any savings from refinancing. Is there enough time remaining on your loan to make refinancing worth it? If you are near the end of your loan term it is likely not worthwhile to refinance.

  • Your Car’s Condition. Is your car retaining value and eligible to be refinanced? If you owe more on your car than it is worth, you will most likely not be eligible to refinance.

And that’s everything you need to know about adding, keeping, and removing a cosigner from an auto loan. 

If any of the above situations were relatable to you, it might be a good time to consider vehicle refinancing. At Auto Approve we can help you compare quotes from multiple lenders and help you refinance today. With an A+ rating from the Better Business Bureau, you know you’re in good hands with our team.


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*APR and Fees Disclosure: Auto Approve works to find you the best Annual Percentage Rate (APR), which is based on factors like your credit history, vehicle and desired payment terms. Fees to complete your loan refinance vary by state and lender; they generally include admin fees, doc fees, DMV and title. Advertised 6.24% APR based on: 2019 model year or newer vehicle, 730 minimum FICO credit score, and loan term up to 72 months. All loans subject to credit and lender approval.
Auto Approve has an A+ rating with the BBB and is located at 2860 Vicksburg Lane North Plymouth, MN 55447. Auto Approve works to find its customers the best terms and APR, which are based on factors like credit history, vehicle, and desired payment terms. Loan amounts, costs, and fees vary by state and lender; they generally include admin fees, doc fees, DMV, and title fees, depending on the lender and period of repayment. There is no fee to obtain a quote and all refinancing-related costs are included in the amount financed so there are no out-of-pocket costs! For more information, please go to AutoApprove.com.