To remove your name from a car loan, there are really only three paths to take – refinance, sell the car, or pay off the loan. Even if you’re divorced from your co-borrower and don’t drive the car anymore, you could still be held responsible for the loan unless you officially remove your name from the title. If you find yourself in this position, there are ways to get your name off an auto loan after divorce.
Divorce and Co-borrower car loans. Divorce can make the splitting of shared property and assets messy. And while relationships can change drastically over the course of a car loan, to relinquish the responsibility of a car loan after a divorce, the loan needs to be paid off in some way – whether that’s naturally over the course of the loan term, by selling the vehicle, or by refinancing.
Joint loans stay that way until paid. When two borrowers share a car loan it's called a joint auto loan. If those borrowers split from each other, and are now divorced, the reality is that the auto loan needs to be paid off or refinanced to remove one borrower's name. After a loan contract is signed, both co-borrowers are responsible for the car loan, and both names are listed, and remain, on the vehicle’s title – even if they get divorced later on.
The loan can impact your credit. While there may be court orders during a divorce mandating that only one borrower pays for the vehicle, the lender can still ask either of you to pay for a joint auto loan. Additionally, the negative and positive reporting actions from the car loan can still continue to impact your credit score even if you’re not the one actively maintaining the vehicle or paying the loan.
Removing Your Name From a Joint Car Loan
If you want to remove your name from the auto loan, there are a few options to do so:
1. Pay off the loan
If you can pay off the remaining balance, then you end the loan and the obligation to the loan contract. Once the loan is paid off, both names still remain on the vehicle title, though. If you want your name off the vehicle’s title once the loan is paid off, then you can simply sign the title over to the person keeping the car. Your ex-spouse can head to the Department of Motor Vehicles or Secretary of State to apply for a new title without your name on it.
2. Refinance the car
If the other borrower/ex-spouse wants to keep the vehicle and you want your name completely off the loan, then refinancing is a good route to explore. Refinancing involves applying for another loan on the same vehicle, and if approved, the new loan replaces the old one. The new lender pays off the previous loan, removing your name, and allowing the ex-spouse to keep the vehicle if they qualify for refinancing alone.
3. Sell the Car
If you still have a loan on the vehicle, you can either sell the vehicle for enough to cover the remaining balance or pay out-of-pocket for any amount left over after the sale. Once the loan is paid and the vehicle is sold, both you and your ex can both be removed from the title of the car, and are freed of your obligations to the lender.
Since a joint auto loan means two borrowers have equal rights to the vehicle, this also means that both borrowers must agree to the sale or refinancing of that car. If one of you tries to sell or refinance the vehicle without the other’s permission, then the borrower that was left out could pursue legal action against the other.
If you and your ex-spouse decide to sell the car, it’s very likely that both of you need to be present for the sale and/or sign the title over to the next owner as well.
Need a Bad Credit Car Loan After Divorce?
Divorce can negatively impact your credit score. This can happen for many different reasons, but usually, it’s due to changes in income and lifestyle adjustments.
However, bad credit resulting from divorce is typically considered situational bad credit. This means a subprime lender may be able to assist you since they can tell the difference between habitual and situational bad credit. If you have the ability, stability, and willingness to pay for your next auto loan, you could qualify for a subprime car loan despite a lower credit score.