Having a cosigner can help you get approved for car loans when you have little or bad credit. As you get to the end of your loan you might find yourself wondering how to remove the cosigner from the car title after the payoff.
Key Takeaways
- To remove a cosigner from a car title, gather necessary documents, secure the cosigner’s consent, and follow your state’s DMV procedures.
- Paying off the car loan is essential for title transfer; notify your lender and ensure the title reflects ownership without liens.1
- After loan payoff, the lender releases the lien and then you get the car title; an official document that proves who owns the vehicle.
What is a Car Title?
The car’s title is the legal document that establishes ownership and lists any co-owners or cosigners. It is essential for clarifying legal rights to the vehicle. The title lists important details like the owner’s name, the vehicle identification number (VIN), and any lenders or lienholders who have a legal claim to the car until a loan is paid off.
If there’s more than one owner, the title will show all names and whether both must sign to sell or transfer the car. Keeping your car title up to date is important because it shows who legally owns the car and who has the right to sell, transfer, or refinance it.
What Happens After Car Loan is Paid Off
Paying off the original loan is what triggers the release of the lien and the issuance of a clear title. Once your loan is fully paid, your current lender issues a lien release to your state’s Department of Motor Vehicles (DMV). In many states, the DMV then mails you a clear title within 2–6 weeks.2
1. Check How Names Appear on Your Title
Look at your current title to see how the owners are listed. If it says “and” between names, all owners must agree and sign to change the title. If it says “or,” some states allow one owner to make changes alone.
2. Get the Lien Release
Make sure you have proof that the loan is paid off. This is usually a lien release letter from the lender or an updated title showing “clear” status.
3. Complete a Title Transfer Form
Visit your local DMV or its website to find the correct form to update or transfer your title. Both you and the cosigner may need to sign this form, depending on your state rules.
4. Submit Paperwork and Pay Any Fees
Take the signed form, lien release, and your ID to the DMV. You may need to pay a small title transfer fee. Once processed, you’ll get a new title with only your name (or the names you choose to keep).
5. Consider Refinancing if Needed
If the cosigner’s name is also tied to an active loan balance (not fully paid), refinancing into a new loan under your name alone is often required before removing them from the title.
Reasons to Remove a Cosigner After Loan Payoff
If the cosigner was added to the title and listed as co-owner you might want to remove them once you’ve paid off your car loan. Common reasons include:
- Changes in relationship status; a divorce decree can specify who will keep ownership.
- Removing them from your car title can give you full ownership and control.
- Keeps their name clear if any future issues arise with the car.
- You want to sell or trade in the car without involving the cosigner.
- Insurance, registration, and title updates are simpler with only your name on the title.
- No need to keep cosigner on the title, if they were only used to get approved for loan.
Cosigner or Co-Owner?
When updating a car title, it’s important to know whether the other person is a cosigner or a co-owner because they’re not the same thing.
What is a Cosigner?
A cosigner is someone who helps you get approved for a loan by using their good credit. They don’t get any of the money or own the car, but they are equally responsible for paying back the loan.
If you miss a payment or can’t pay off the loan, the cosigner must pay it instead. This can negatively affect the cosigner’s credit score and increase their debt-to-income ratio, making it harder for them to qualify for new credit. The cosigner impact includes potential changes to their financial standing, as their credit and ability to borrow can be affected by your actions. Once the loan is fully paid off, the cosigner’s responsibility ends, but their name may still be on the title until you take steps to remove it.
What is a Co-Owner?
A co-owner, on the other hand, may have co-borrowed the loan, meaning both borrowers are listed on the loan and the car title. In these types of loans, both parties share joint responsibility and ownership, and both borrowers’ financial standing can affect the terms and management of the loan. Understanding the differences between cosigned loans and co-borrowed loans is crucial for managing your financial and legal obligations.
What if a Cosigner Does Not Cooperate?
Most of the time, cosigners are happy to sign paperwork to be removed. But sometimes, a cosigner might be unavailable or unwilling to help.
If your title says “and,” you usually need their signature to transfer ownership. In that case, you may need to:
- Talk to the cosigner to explain why removal helps them, too.
- If the loan is still active, offer to refinance the loan under your name alone.
- Seek legal advice if they refuse and you can’t resolve it directly.
If your title says “or,” you might be able to remove them without their signature, but always check your state’s DMV rules first.
Refinancing to Remove Cosigner
Refinancing your active auto loan is another effective way to remove a cosigner.1 This process involves applying for a new loan to pay off the existing loan or current loan, but without the cosigner. Your credit history, income, and making car payments on time are important factors that affect your ability to qualify for refinancing and secure a favorable interest rate.
A refinance can lead to better interest rates, different loan terms, and smaller monthly payments. Alternatively, you can use a personal loan to pay off the auto loan and remove the cosigner. To successfully remove a cosigner during refinancing, sign a change of title form and provide specific documentation to the new lender. This ensures the new loan is solely in the primary borrower’s name, giving them full financial responsibility and ownership, along with a cosigner release option.
What is a Car Title Loan?
A car title loan is a type of short-term loan where you use your vehicle’s title as collateral. The lender holds the title until you pay off the loan in full.4
These loans are different from a standard car loan you get when buying a car. In both cases, the title connects the borrower, cosigner (if any), and lender. Once you pay off a title loan, the lender must remove their lien, clearing the way for you to update the title.
Summary
Removing a cosigner from your car title takes some planning, but it’s straightforward if you follow the right steps. Make sure you have all the required documents, get the cosigner’s permission if needed, and visit the DMV to update the title.
Knowing what a cosigner does and how paying off your loan affects the title helps you understand the process better. If needed, while your loan is still active refinancing the car loan in your name only is another way to remove a cosigner.
Always keep good records, talk openly with your cosigner, and ask for help if you’re unsure about any part of the process. Once you remove the cosigner, you’ll have full ownership and control of your car.
FAQ
What Happens to a Cosigner When a Car is Paid Off?
When you pay off the loan, the cosigner’s legal responsibility for the debt ends. However, their name may stay on the title until you transfer it.
Can a Cosigner Take Full Ownership of a Car?
Not usually. Unless the cosigner’s name is on the title as a co-owner, they have no claim to the car itself — just responsibility for the loan.
Does Removing a Cosigner Affect Your Credit?
Paying off or refinancing the loan can slightly change your credit score. Removing a cosigner from the title alone doesn’t usually affect your credit, but closing a loan account might.
How Long Does It Take to Receive a New Title After the Transfer?
You can expect to receive your new title within 10 to 15 business days after submitting the title transfer documents.
Written by
Bryan Solis
Bryan Solis brings over a decade of expertise in the lending industry, specializing in auto finance, personal loans, and car title loans, with experience in both prime and subprime lending. Leveraging his academic foundation in Business Administration, he has played a role in in the growth of start-ups as well as driving sustained success in established organizations. Currently serving as Head of Sales at 5 Star Loans, he has demonstrated exceptional skills in operational leadership and client relationship management, contributing to the company’s success.
