Can You Switch Co-Signers on a Car Loan

Can You Switch Co-Signers on a Car Loan

When arranging a car loan, having a co-signatory can be a practical solution to secure the loan if you have a limited credit history and a low credit score. Things happen, and switching co-signers on your car loan may become necessary. You are now wondering if this is possible or if you will lose your car. 


The good news is that it’s possible to change the co-signatory, but it’s not simply a case of replacing one name with another. Read on as the financial experts at explain the implications of changing a co-signatory on your loan.


What Does it Mean to Co-Sign for a Car?

Having someone co-sign on your car loan means a trusted person shares joint responsibility with you for the loan repayment. In other words, if you can no longer repay the loan, your co-signatory will pay the money to the lender.


Having a co-signatory on the loan application encourages the lender to trust that the loan will be repaid, either by the co-signatory or the primary borrower. It can also mean a loan that would, under normal circumstances, be refused will now be approved, or the interest rate on loan may be lowered as the risk is lower.


Can I Switch Co-Signers During the Loan Period?


The answer to this question is yes, you can switch, but it’s not a simple transaction. Changing after the loan has been granted can be complex as lenders will have evaluated the loan application based on the creditworthiness of the primary borrower and the co-signatory. 


Lenders have specific policies regarding switching a co-signer. There are bound to be conditions attached to allowing this to happen. The lender may consider this a completely new loan and insist that this is re-financed. They will consider your application with the new co-signer details as a new loan, and if approved, they will ‘pay off’ the old loan with the new one, and you will continue paying on the new loan.


To change the co-signer on your loan, you’ll need to contact the lender and speak to them about the change. They’ll be able to guide you on the procedure to follow. At the least, the new co-signer will have to submit their financial and personal details to the lender so that they can be assessed concerning the loan. 


Changing is Possible But Not Easy


Changing the co-signer on your loan is possible but has challenges. The lender's specific policies will play an important part in whether or not this is possible. This is not a simple case of taking one name off the agreement and putting a new one on, so you must contact the lender and discuss your options. Remember that clear, honest communication with your lender is critical while navigating this process. 

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