Avoid Costly Mistakes: The Right Way to Use a Cosigner Release Form

Do you have a cosigner on your car loan, mortgage, or student loans? Cosigners can help you get approved for a loan with little credit history or income needed to qualify. For example, in 2024, 90% of undergraduate loans and 65% of graduate loans required a cosigner. So, what happens to your student loans when you graduate? Many students request a cosigner release form upon graduation and obtaining their first job. This is the most typical situation for needing the release of a cosigner. You may also need to release a cosigner from your mortgage or car loan if a parent helped you qualify for the loan and your financial situation has changed. Lastly, you may have a credit card with a cosigner but this is a less typical situation.

To initiate a cosigner release form you’ll need to contact your lender. You’ll need to demonstrate your ability to pay your loan and submit the required documentation. They may ask for income, employment history, or credit score, and history. 

Review Your Loan Terms

There may be costs associated with releasing your cosigner. Check the terms of your lease before making a decision to request a cosigner release form. Most often, cosigner releases are available for student loans and sometimes auto loans.

Instead of releasing your cosigner, it may make more sense to refinance or consolidate your loan instead. Lenders may be wary of taking off a cosigner because it increases their risk. So, many lenders won’t give you the option to release your cosigner. They may raise your interest rate if you choose to release your cosigner.  Many lenders will require you to make a certain number of full, on-time payments by the primary borrower before they will consider releasing your cosigner.  In reality, even if you apply to release your cosigner these applications are hardly even approved. In fact, a 2015 report from the Consumer Financial Protection Bureau found that lenders rejected 90% of consumers who applied for cosigner release from private student loans.

Implications of Releasing a Cosigner

It’s best to consider the credit impact on both you and your cosigner. Any loan that is refinanced or where a cosigner is removed will show up as a closed account. This can negatively impact your score for years. It may be in both your best interests to not remove your cosigner.  One of the best options is to just pay off the loan if it is within your means to do so.

If you still choose to request a cosigner release form, make sure that you meet the eligibility requirements and that you are financially able to pay your loan. If you default on your loan at any point, this could be a risky mistake that can impact you for many years. Therefore, it’s important to carefully consider if you can feasibly remove your cosigner from your loan.  

Read More

Stay Vigilant: Recognizing and Avoiding EBT Scams

Crypto as a Retirement Plan: How to Use Digital Assets for Long-Term Savings

Teri Monroe

Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.