When To Ask for a Co-Signer Release
If you've ever had to reach out to friends or family to co-sign a financial document (like a student loan, or for a car), then you may be wondering for how long--and to what end--having your loved one attached to such an expense is necessary. The benefits of having a co-signer are plenty--especially for someone trying to build credit, because a co-signer essentially ties their credit score and repayment responsibilities to your loan application--but there are just as many reasons why it might be wise for you to consider asking for a co-signer release.
Conversely, if you've co-signed a loan for someone, but hope to eventually release yourself from being responsible for their loan if they stop paying, getting a co-signer release form could be a smart move.
Having a co-signer on your auto loan (or any loan for that matter), especially when you're just getting started out in life, or trying to re-establish credit, can be a true blessing; but think of a co-signer as being your financial training wheels. Eventually, they have to come off, and you have to pedal on your own.
Releasing Your Co-Signer
Releasing your co-signer first and foremost frees you from being tied to another person's financial well-being. If your co-signer was to fall into financial distress, or passes away unexpectedly, you could find your loan in a default scenario. Some loans, like student loans, can automatically go into default after the death of a co-signer, leaving you, the borrower, on the hook for payment in-full immediately.
Getting Released From a Loan
As a co-signer, you probably have just as many reasons for wanting to be released from a loan, as you did for being willing to co-sign for one. Asking to be released from a loan isn't unkind--it's simply smart business. Assuming your loved one has been faithfully repaying the loan, you both will have benefited from signing, and if they haven't, then you're simply keeping yoruself from being harmed by their circumstances.
At the end of the day, co-signed loans help the world go 'round. They free up capital for those who might otherwise not have access to it, and help more established people remember that it's always good and kind to "pay it forward" when we can in life.
Have you considered co-signing a loan for a friend or family member? Have you co-signed a loan, or asked for someone to co-sign for you? Please sound off in the comments about your experience!