How Cosigning Affects Refinancing Car Loans
If you’ve taken out a loan on your vehicle, you might want to refinance it at some point. Whether it’s due to a change in the economy or your own financial picture, the financing experts at Ole Ben Franklin Motors are ready and willing to help.
One question we hear occasionally is “Can you refinance a car with a cosigner?” The answer can get a bit complex.
What’s a Cosigner?
First, let’s talk about what a cosigner does. This is the person who also signed onto your car loan.
If you couldn’t secure financing on your own due to a low credit score or the lack of a credit history, this person has put their own credit on the line to help you get a loan. Making late payments or defaulting on your loan will affect them too.
Can I Refinance?
If you have a cosigner, you can refinance your loan. Usually, you need to keep the cosigner on your loan. This means that they will have to agree to the new terms of the loan agreement as well.
Sometimes you can refinance your loan and remove a cosigner. This is only possible if your credit has improved since you took out the loan in the first place. If your credit has gotten to a place where you could be approved for a loan on your own, you may be able to remove your cosigner.
Just be aware that removing the cosigner from your loan could result in an interest rate that’s higher than you would like. The better credit you have, the lower the APR you can generally qualify for, and the interest rate was largely determined by the credit history of your cosigner before.
If you have any more questions about financing, visit one of our new car dealerships serving Alcoa, TN. We’ll help you learn more about car loans!