When you co-sign for a loan, you're putting your own credit at risk if the primary borrower stops making payments. If that happens, you will have to make the loan payments yourself to avoid damaging your credit. Moving the loan from the primary borrower's name to your own can help you remedy that problem, because if the loan is for a tangible asset – like a car or a home – you can keep the asset.
Having the loan in your name helps in another way, too: It's a positive item on your credit report. If the primary borrower isn't willing to have his name taken from the loan, however, it can be difficult to achieve.
If you're the co-signer, you can either ask the loan holder to remove herself from the loan, or you can pay the loan in full yourself.
How to Get Started
If you can persuade the borrower to voluntarily remove himself from the original loan, the process will be faster and less difficult. If not, the first step toward putting the loan in your name is to get in touch with the holder of the loan. Tell the lender that you are a co-signer of the loan and you want to refinance it in your name only. If the primary borrower is willing to give you permission to take over the loan, she might be asked to sign a form to that effect, and you will then be the only person listed on the loan document.
Pay Off the Loan
Once the loan is in your name, determine how much is owed on the loan – the current balance and any late fees or penalties. The lender will have that information and is required to tell you, as you are a co-signer on the loan. You'll then need to pay the loan in full.
If the loan amount is more money than you can easily pay, you can apply for a new loan either with the issuing bank or with a lender of your choice for the amount that is due on the loan. Once you have the money, you can pay off the original loan in full, and you will be the sole holder of the new loan.
Contact the Primary Borrower
Once you've paid the loan off, get in touch with the primary borrower and tell her the original loan has been paid. If you have arranged to collect money from her for the unpaid loan amounts, tell her how much she owes and arrange a payment plan. Be prepared to take the primary borrower to civil court to force her to pay you for the loan, if she does not agree to do so. You will need to present the judge with proof that the other person did not meet her obligations.
Items you will need
- Original loan documents
- If you can persuade the borrower to voluntarily remove himself from the original loan, the process will be faster and less difficult.