Getting a divorce is never something that is planned, so having your spouse on your vehicle loan seems like no big deal, but when the inevitable hits it could mean disaster.

Cosigned Loans Can be a Hassle in Divorce

When you get married it makes sense to have your spouse with better credit cosign for your car loan. This will help you to build up your credit scores and also to help the family out by having a second car to get all the errands done. Unfortunately, if your marriage doesn't last as long as your car loan, you could be in some deep trouble. A cosigner is legally bound to the loan and is responsible for paying it back if you are no longer able to. So what happens if you two are heading for divorce and you want to get his or her name off the contract?

When going through a divorce you are given a divorce decree that states both parties are responsible for paying back any debt accumulated in the marriage. That means that your spouse is not going to be taken off the loan just because you want them to be, or just because you make the payments. The only way to accomplish this task is to refinance the car loan.

Why Refinancing is a Good Idea

Many people don't even know that refinancing their car loan is an option, but it can have great benefits for you – the first and most important being; you will be able to get your ex's name off your loan (or your name off their loan). The other big benefits you can take advantage of are:

  • Getting a lower interest rate
  • Lowering your monthly payments
  • Paying the loan off quicker

If you have made all of your payments on time thus far into your car loan, it is likely that your credit score has improved some since you obtained the original loan. If this is the case you will likely qualify for a lower interest rate with your refi, and help reduce the total cost of the car, plus lower your monthly payment, too.

As we just stated, you can lower your monthly payment with a more favorable interest rate, but the only way you will get that is if your credit score has increased. So what happens if your credit score has stayed the same or worse yet, lowered? You can still get a more affordable monthly payment with a refinance, just in a different way. Instead of lower the payments with the interest rate you can do so with the loan terms. If your original loan was for 48 months and you decided to refinance after 24 months; you still have 24 months left. At the time of your refinance you can stretch that 24 months back out to 48 months. This stretches your payments out for a longer period of time, and will cut your payments in half. The down side to this is the fact that with a longer loan term you will be paying on the vehicle longer, bettering your chances of being upside-down on the loan longer, and spending more money on interest over the life of your loan.

If your goal is to own your vehicle outright without having any payments, a refinance can help you in that aspect, too. If your current payments are affordable enough for you to continue to make, (even after you received a lower monthly payment and interest rate with a refi), you should keep sending that amount. The extra payment you make each month will be applied to your principle balance on the loan, and will result in your paying your loan off a few months early. As long as your refinance lender does not charge you early loan pay-off fees, you could greatly benefit from this.

How to Refinance Your Auto Loan

If you have ever been through a home mortgage refinance you will be pleased to know that the process of refinancing your car loan is not nearly as complex. There are usually no fees involved and the process can take just a couple of hours.

Our trusted partner allows you to view and compare refinancing quotes online. All you have to do to get the process started is complete the easy and free refinance request form on our website.

Qualifying for a Refi

Not everyone will be eligible for a refinance. Lenders aren't going to take a risk on a vehicle that won't potentially make them back what they are giving out; plus some. Each refi lender has different requirements for their refinance programs, but the general census is:

  • Your vehicle must be no more than 5 years old
  • Have no more than 75,000 miles on it
  • You must have at least 2 years left on your loan

If your car is too old or has too many miles on it, the lender may deny you the refinance because they don't want to take a huge risk on losing a lot of money. They want a vehicle that they are able to sell at auction that will allow them to, at the very least, break even. If they don't believe your vehicle will be worth that much, they may ask you to visit another lender.

Having bad credit is not an automatic denial either. All of the lenders within our nationwide network can and will work with bad credit borrowers to help them in any way that they can. Nobody wants to be stuck on an auto loan with a person that could take advantage of their credit scores, and our lenders understand this.

Not Refinancing Could Cost You

If you are the spouse that has your name on the loan but you're not footing the bill, you could face some damage to your credit score if you don't get it off. If the responsible party for the loan is not responsible and misses some payments or even just pays them late, your credit will also be affected. What's worse is you may not even know that he/she is paying late (or not at all) until you start getting notices in the mail and phone calls from the collection agencies. Avoid any potential credit issues and have your spouse refinance the loan to get you off as a responsible party.

As We See It

Regardless of which side of the situation you are on, refinancing your loan is the best possible choice for everyone. If you're the primary borrower you will no longer have your ex-spouse breathing down your neck each month to pay the bill, and you could benefit from a cheaper payment. On the other hand, if you're the co-signer, you will no longer have to worry about your good credit score being affected.

Don't hold off any longer and apply online today to get your car loan refinancing underway. Auto Credit Express makes the process simple with our secure online application, and once you submit the information we will contact you to schedule an appointment with one of our lenders. Get started today, get your last joint account taken care of, and put some extra cash in your pocket each month.