So you have the perfect vehicle that your partner co-signed on, but they weren’t quite as much of a match, so now what do you do about the loan?
You are both technically responsible for the loan.
Regardless of who uses the car, or one decides to keep it, both persons are responsible for making that payment. This can be quite tricky to coordinate, especially if the break up isn’t very amicable. One person could say they will make the payments but not follow through or be late. This will have a negative effect on both persons credit rating. To be safe and for the sake of protecting your own credit score, it is best to either have yourself removed from the loan and give up the vehicle or have the other person and removed and keep the vehicle.
Unfortunately, it’s not as easy as just calling the finance company and having a person removed. Both persons signed a legal contract to pay for the vehicle. When you purchased the vehicle, the payments are calculated based on the financial circumstances and income of both persons. This means the situation changes when one person is removed.
What are the options for removing a person?
It isn’t going to be easy, but this is probably the best option if one person wants to keep the vehicle. The bank or finance company will re-asses the financial situation of the one person who wants to keep the vehicle. It will be like buying it again. The person who is to be removed from the loan will sign the paperwork for selling the vehicle, thus removing their name from the vehicle and loan. This can be done at a dealership or bank. The outcome of this will depend on the financial situation of the person buying. It may decrease or increase payments. This, however, might not be an option for the person wanting to keep the vehicle if they do not have good enough credit or income to be able to qualify for a loan by themselves.
2. Sell the vehicle
If neither person can qualify for refinancing the vehicle or neither person wants to keep the vehicle, sell it. You can ask your local dealer if they would buy it from you or take it as a trade-in. Selling it privately is also an option, but remember both parties are still responsible for making the payments until it is sold and the loan is paid off. You will have to sell it for the full amount owed on the vehicle (the payoff) or be able to pay the difference to clear the loan. The title will not be released until the loan is completely cleared (paid off).
3. Pay off the loan
If you happen to have enough equity, cash, or assets that you can free up the amount needed to pay off the loan, you can do this allowing both persons to be free from the loan. For example, if you sell a house and have enough money left, use this money to pay off the car loan. You will still need to have the other person removed from the title though. Contact your local county clerk’s office for more information on how to do this.
4. Seek legal advice
If divorce is on the table and a compromise about assets and vehicles cannot be made amicably, is it best to seek legal advice.
Lauren has been working in the automotive industry both in the U.K and in the U.S. for over 10 years. A car geek, photographer, big game chaser and bagpipe player, powered by coffee. Send your questions to: