Take Someone's Name Off a Loan

Removing a cosigner from a loan isn't always advantage from a lender's standpoint. With two names on a loan application, lender's are practically guaranteed payment from at least one person. But under certain circumstances, some lenders are open to modifying the agreement and taking a name off the loan.

Applying for a student loan, auto loan, and a mortgage loan with bad credit or no prior credit history is never fun. Lenders aren't always helpful and they might laugh you out of their offices. But like many obstacles in life, getting a loan with no credit or bad credit is possible. It requires a little creative thinking on your part and usually the help of a cosigner.

While you're no doubt grateful to the individual who agreed to cosign your first loan, you might be ready to branch out on your own and remove this person's name. Perhaps you've improved your credit score since applying for the loan, or maybe your cosigner wants to drop his name from the loan. Countless situations justify altering the names on a loan agreement. But while removing a cosigner might seem simple, this process entails more than calling the lender and making a request. 

Read Your Loan Document

There's a chance that your lender included a clause in the agreement related to the duties of your cosigner. If you're fortunate, the agreement might include a cosigner release clause that allows you to remove the cosigner after a specified number of months. Releasing a cosigner is often subjective to timely payments on the part of the primary borrower - in this case, you. Missing a payment and skipping a payment can kill your chances of removing the cosigner from the loan. 

Refinance the Loan

If your loan agreement does not mention a cosigner release clause, refinancing is your only option for removing the cosigner from the loan. In other words, you must apply for an entirely new loan to replace your original loan. This new agreement comes with brand new terms and conditions. Since this loan replaces the original, once you're approved, your cosigner is automatically "off the hook." But there's a catch. To refinance the loan and take someone's name off the agreement, you must qualify for the loan on your own. 

Your credit score, income, and employment record are all called into question. Not only do you need a high enough credit score to meet the bank's requirement, but your income must support the payment. Remember, when you applied for a loan with a cosigner, the lender took both scores and incomes into account. This often results in qualifying for a higher loan amount. Without this person's income, the loan payment might be more than you can afford. But if you're able to manage the loan on your own and you've demonstrated creditworthiness, the lender will likely approve your request and write a new loan.