Cosigned a Loan or Lease? Whether You Can Get Released and What You Owe in the Meantime

A cosigner is fully responsible for the whole debt from the first day. Only the lender or landlord can release you, so the practical question is how to give them a reason to. The sooner you plan the exit, the better your options.

What cosigning means

• You are legally liable for the entire balance if the borrower does not pay.
• Late payments can show on your credit report as well as the borrower's.
• The lender can usually collect from you without first pursuing the borrower.
• A breakup, a falling out or a change of mind does not cancel the obligation.

Ways to be released

1. Refinance: the borrower refinances in their own name, which pays off the old loan and ends your obligation.
2. Payoff or sale: the borrower pays the loan off, or the car is sold and the balance is paid.
3. Cosigner release: many private student loans and some other loans let the cosigner request release after a set number of on-time payments and a credit check on the borrower. Read your loan terms for this clause.
4. Lease changes: a landlord can agree to remove a cosigner or guarantor, replace them with a new one or end the lease at a stated date.
5. Bankruptcy or settlement: usually a last resort, and it can affect both people.

What to do if the borrower stops paying

1. Ask the lender for the account status and set up alerts, since you can request information as an obligor.
2. Make at least the minimum payment to protect your credit if you can, and keep proof.
3. Send the borrower a written request to cure the default and ask the lender about hardship options.
4. Consider whether you want to keep the car or property so you can sell it and stop the loss.
5. Talk to a consumer lawyer if the amounts are large.

Getting money back from the borrower

Paying a debt you cosigned can give you a claim against the borrower for reimbursement. A written agreement helps, but even texts and bank records can prove it. Small claims court may be an option for amounts within the limit, though collecting can be hard if the borrower has no income. Our guide to collecting a judgment explains the tools.

Special cases

• Federal student loans generally do not have cosigners, though parent PLUS loans are the parent's own debt.
• A joint mortgage is hard to exit without refinancing, even after a divorce, since a divorce decree does not bind the lender.
• Death of the borrower may end the debt for some private student loans, but not for most other loans, so check the terms.

Before you cosign

Treat it as if the loan were yours: confirm you could afford the payments, ask about a release clause, get account access, and decide how you would exit. Many people decline because of the risk, and that is a reasonable choice.

A hypothetical cosigned car loan

A parent cosigns a $16,000 car loan for an adult child. After a year the child misses two payments. The lender calls the parent, reports the late payments on both credit files and says the full unpaid amount is due from either person. The parent pays the overdue amount, asks the lender for a refinance application for the child, and sends a written request to the child to bring the account current within 30 days. Acting early limited the damage to the parent's credit and kept the car from being repossessed.

Questions to ask the lender or landlord

Ask whether there is a release clause and what conditions apply, whether the borrower can refinance without you, what happens on default, whether you can get statements and alerts, and whether a payment plan is available. Ask the answers to be sent in writing so you have a record.

Frequently asked questions