Divorce is an end of a partnership. Martial assets split and so does martial debt. When dealing with splitting a current car loan during a divorce, you must be clear in the contract as to what you wish to do with it. There are two options for couples who wish to resolve the matter outside of court.
The first option is refinance the car loan. If you wish to keep the vehicle for yourself (or if your spouse wants to keep it) you can refinance the vehicle, which is more than just dropping your spouse’s name from the loan. This process requires financing from scratch; you are essentially applying to finance the vehicle on your own and the lender will ask you to provide proof of income that will show that you can make the payments on your own. If in the event that you do not qualify to refinance on your own, you can always find a co-signer to assist you in getting the approval.
The second option is for you and your spouse to sell the vehicle and pay off the loan. By selling the vehicle and paying off the loan, you will not have to worry about any confusion the car loan may give you during this time. When approaching this option, contact your lender to find out what is your pay-out amount. You ideally want to sell the vehicle to be able to cover the pay-out. If you cannot sell the vehicle for the equivalent amount, you and your spouse will have to pay the difference.
Either option is necessary when dealing with a divorce. As long as both names are on the current car loan, no matter the situation of who’s using it or which account the payments come out of, both parties are equally responsible for the full amount of the loan so it’s better to clear it up! Whether you wish to refinance or even sell your vehicle, call Autorama at 416-639-4899 and speak with one of our finance specialists or simply fill out our online finance no obligation application https://www.autorama.ca/financing/ to know if you qualify to refinance on your own!