My sister co-signed a car loan for me. Payments are current. I have had an injury and cannot drive. She wants to take over my car, which I’m fine with. How will this affect my credit? What needs to be done to remove my name?
She would have to buy the car from you, likely getting as new loan to do so. Lenders are not likely going to just "take your name off the loan". Understand also that her co-signing on the loan does not give her ANY ownership of the car unless you also put her on the title.
This is why it is SOOOO dangerous to co-sign a loan. If, hypothetically, you decided to stop paying the loan, she would have to keep paying it or ruin her credit, and she would have no right to take the car back or force you to sell it.
There are two things at play here:
- The loan debtors; both of you
- Do note that being a co-signer is all risk and no reward. Financially consider a co-signer as co-primary and understand the fact that she took a gigantic risk by co-signing.
- The listed owner on the car title; presumably just you
Your choices include:
Let her make payments
The loan and title stays intact and she just makes payments.
You trust her to not screw up your credit just as she's been trusting you to not screw up hers this whole time.
In order to get your name off of the existing loan it has to be refinanced. This costs money and her credit must be worthy of a solo loan.
However, the existing owner would remain on the title. I think you could change this at the DMV for a fee.
Sell the car to her
Make a legal transaction in which she applies for a solo loan and you sell the car to her making it 100% hers. This would terminate your co-signed loan assuming the sale price meets or exceeds the existing principal.
This would be advisable if your injury is permanent.
Additionally, the fairness of your existing and/or desired arrangement is a whole separate topic which is too lengthy to discuss here.
If you wanted to get into ownership percentages and fair sale price then these discussion topics will be the tip of the iceberg:
- How much have each of you driven the car?
- How much gas have each of you paid for?
- How much maintenance have each of you paid for?
- How much insurance have each of you paid for?
- How much of the loan have each of you paid for?
It can get ugly real quick.
Insurance needs to be taken into consideration. The car is owned by you. If you do not sell the car to your sister (good information in the other answers), then she cannot take out insurance on the car; you would have to maintain the insurance. You cannot insure a vehicle you do not have an interest in.