How do a cosigner remove their name from a car loan if the person they cosign for is not making payments?

Answer 1

Unless the creditor agrees to it, which is not likely, you probably can't. That's the whole point of cosigning: it's not you saying "yeah, my friend is a great guy, you should give him a loan", it's you saying "my friend will repay the loan and if he doesn't then I will do it for him." Since in this case your friend is clearly already not repaying the loan, why on Earth would the bank just let you off the hook? Answer: they won't. Anytime you cosign a loan, you need to realize that you're taking the risk of having to pay off the loan yourself.

You will probably have to tell the creditor that you will not, or are unable to, pay the debt and that they will have to repossess the vehicle. It will probably reflect on your credit rating, however.

That said, there's no harm in contacting the creditor to inquire. The worst that can happen is that they say 'no', which leaves you in the position you're already in, no better, but no worse. (It might potentially get them to speed up repossession proceedings as well: "Hey, the guy who vouched for this deadbeat doesn't trust him anymore either, we need to get our property back as soon as possible.")

You do have a couple of other options:

1. If you can afford to pay off the loan entirely, you could do that and have your friend owe you rather than the bank. Since the original loan no longer exists, you're no longer a cosigner. It won't completely fix the damage that's already been done, but paid off loans look a lot better on your credit report than outstanding ones that are consistently late/missed or a repossession. The disadvantage is that your deadbeat friend is not likely to be any better at paying you than they were at paying the bank, so you're pretty much going to be out that money.
2. If you can't afford to pay off the loan entirely but can afford to make the payments yourself, start doing that and have the other person pay you instead of sending the payments to the bank themselves. Again, you may be out the money (at least temporarily) if they don't pay you on time, but at least the late payments won't be showing up on your credit report.
3. If you can't afford even to make the payments, you might see if you can find some other bank that's willing to refinance the loan without you as a cosigner. If you can (admittedly not terribly likely), it will probably be on horrible terms, and your friend will likely end up defaulting and losing the car anyway, but at least the existing loan will be paid off and the repossession won't go on YOUR credit.
4. If all else fails, have your friend do a voluntary repossession (contact the bank and make arrangements to take the car to them and hand over the keys) rather than having the bank send someone to come and get it. He and/or you will probably wind up having to pay off the difference between the amount owed and the fair market value of the car. This is not a great option, but it's slightly better than having the bank repo the car themselves (in which case the difference between the amount owed and the fair market value will still have to be repaid, plus the amount charged by the repo company will also have to be paid). Your friend loses the car, but that was going to happen sooner or later anyway.