How to Deal With An Auto Loan After Divorce

 Divorce is not only emotionally difficult for you but it is also difficult for your financial condition. How?

When a marriage ends, individuals split assets and go separate ways. But, what happens to liabilities such as an auto loan?

In an ideal world, both the individuals assume the responsibility of the debts they created and part ways. Unfortunately, the reality is different. So, take care of debts after a divorce.

The Legal Liability of an Auto Loan

Do not believe that just because the divorce agreement holds your former spouse responsible for the auto loan, he/she will make regular payments. It is plausible that he/she may not make payments.

You must remember that the divorce agreement is separate from your loan contract. Lenders do not give importance to the divorce agreement. Your former spouse may be responsible for the loan in the eyes of a court. But, if you applied for a joint auto loan, lenders will hold you accountable for the loan as well.

How to manage an Auto Loan after Divorce?

It is important to remember that your marriage may be history, but a loan will continue to affect your present and future. Here's how you can manage your auto loan and save your credit score from plummeting.

1. Get rid of the Loan

After a divorce, the best way to manage an auto loan is to get rid of it. If your former spouse is responsible for making payments, the loan should be in his/her name only.

But, remember that no lender will remove your name from the loan contract because of your changed marital status. So, your former spouse will have to refinance the loan and complete the loan process individually.

2. Get rid of the Car

If you are worried about refinancing the loan, you can sell the car and pay off the lender. It is possible that an upside down loan situation may force you to pay money to the lender, but it is important to understand that a loss today is better than constant tension forever.

3. Make sure the Lender gets paid

If your former spouse is responsible for the loan and both of you decide against selling the car, you will have to make sure that he/she makes the payments regularly.

If your former spouse doesn't make payments, contact your attorney. It is possible that you will have to make a couple of payments to avoid any negative impact on your credit score. So, keep aside a part of your income for it.

Taking care of your auto loan might be the last thing on your mind. But, it is important to understand that your marriage is over and not your auto loan. If you don't manage it effectively, you may ruin your credit score forever.

Before You Get to the Car Dealers: Getting an Auto Loan

 So, you have a new automobile in mind, but you don't have quite enough money on hand to pay for it in cash. It is time to take out an auto loan. Auto loans are a great way to help you get in the vehicle you want. The process of taking one out might be a little daunting, so here are some tips to help you with the procedure, from checking your credit score to finally driving home.

Credit Score

Before you begin visiting local car dealers to pick up the perfect vehicle, you should take a look at your credit score. This number will play a big role in whether or not you will be approved for an auto loan and at what rate. There are several websites that provide free credit reports to help keep you informed of your credit score. Find a site that is easy for you to navigate and use it to check your score often. Your credit score changes month to month, so your soft credit score might go up while you are looking at automobiles.

Determine Your Payment

After a home, an automobile is usually one of the biggest undertakings a person will assume. In order to be a smart buyer, you should determine how much of your income can be spent on your new purchase. Keep in mind that, along with loan payments, a vehicle will need insurance, gas, and regular maintenance. A good percentage of your income to spend on all of these related expenses is about 10-15%.

Seek Pre-approval

Just like for credit scores, there are several opportunities for auto loans that can be accessed online. Many of the nation's top insurance companies offer pre-approval applications through their websites. It is also a good idea to check with your local bank or other financial institution. Since the bank will be a little bit more familiar with your unique financial situation, they might be able to offer you an improved rate or payment than other companies. Finally, some car dealers offer financing help through the dealership. If you have a particular retailer in mind, contact their financial office to see if they can help you navigate the process.

Pick a Vehicle

This is the fun part of the purchase: choosing what vehicle best suits you. Keeping your allowance in mind, you can begin shopping at nearby car dealers for something that fits your style and needs.

Paperwork

Once you've made your decision, you have to go through the process of filling out all of the paperwork. Representatives from the car dealers will be helpful in this period since they have to do it on a regular basis. This representative will work with your lender to finalize the loan for the vehicle, as well as help you get the necessary warranties or protection for your new purchase.

Now that you have completed all of the steps in securing your auto loan, the only thing left to do is drive your new vehicle home from the car dealer.