Divorce can be a rough time, especially on your credit. Divorce agreements may say who is supposed to make payments on an auto loan, but depending on whether or not the nominated party actually does their part they may not be the only person who is affected. Because divorce agreements are separate from any loan paperwork they have to be handled separately and it can be really hard to untangle. Here are some suggestions how to remove an ex from a car loan and keep it from ruining your credit.
Lender make the choice whether or not to loan money to a couple based on both parties’ credit history and income and they don’t really want folks to go their separate ways. Payments made (or not made) on a loan in your name may be reported to the credit institutions whether it was decided to be your responsibility or not.
Make sure payments are made
If you become responsible for a loan after a divorce, pay if off. If your ex is responsible, you need to make sure that they pay it. This can be hard or even impossible to do, but some good steps are to make sure that the financing company send all loan information to both you and your ex. The person responsible for paying the loan can get in the most legal trouble or even lose the car, but that doesn’t mean that you won’t end up in a world of financial hurt if payments aren’t made.
Refinance the auto loan
In order to get your name off of an auto loan or any kind of financial agreement you will have to refinance. The person who needs to pay off the loans should try and get a new loan, which can be tricky if they do not have good credit, or if their income alone isn’t enough to support the loan alone. Getting your name off the title of the vehicle is a separate question and can be handled at the DMV.
Sell the vehicle
One of the cleanest ways to make sure that an auto loan doesn’t follow you or your ex-spouse into your new lives is to sell the vehicle, pay off the debt, and split any proceeds evenly. Depending on how much the vehicle is worth (and how much debt is still owed) you may end up needing to pay to get ride of it. But getting rid of your old car for a new one might be better than having loan payments hanging over your head.
You may be legally separated, but remember that loans you made while married can still affect you. It is best to get ride of them as much as possible, and important to know what loans are in both of your name. For the sake of maintaining your good credit and being able to easily get loans in the future, be careful.