Car Loans After Divorce: Everything You Need to Know

There are a few considerations to keep in mind if you require a car loan after divorce in order to properly manage this.

 

Your financial situation could suffer significantly after a divorce. All of these costs have an impact on the maximum auto loan amount you are eligible for; many lenders won't approve a car loan if your debts total more than 40% of your gross income before taxes.

 

What to do With a Joint Car Loan

You have choices if you have a joint auto loan, but they depend on whether you can resolve everything amicably or not.

 

Sell the Car, Pay the Loan: Selling the car and paying off the loan gives you both a fresh start. After that, you can either use any remaining equity to purchase a new vehicle or file for a new auto loan in your name alone.

 

Refinance the Loan: If one of you decides to keep the vehicle, you can take out a new loan in your name to pay for your spouse's part.

 

 

Let the Court Decide The least appealing and generally least satisfactory option. If you and your spouse don't get along or can't agree on how to handle the car loan after divorce, the divorce process may include it.

 

We advise having an in-depth conversation with your lender before refinancing or filing a lawsuit, if you decide to do so. Even if it's just to let them know that things are getting better and you might be paying the loan off early.

 

This strengthens your relationship with your lender, which could prevent a lot of stress in the event of a refinance or a missed payment.

 

Income & Credit Score

Do you have a comfortable life? Maybe during the marriage you didn't work full-time or were a stay-at-home parent. After a divorce, your income might not be high or sufficient to meet the requirements for a car loan. You must have worked for at least 90 days, and your salary must be enough to cover both the car payment and your basic needs.

 

What is your current credit score? It makes financial sense to use free services like Credit Karma to monitor one's credit score.

 

 

Your credit score likely fell during and immediately after your divorce; a lower credit score means you'll likely pay a high interest rate on any loans you take out. Anything above 680 is considered to be an excellent credit score, so you must work hard to reduce your bills while making sure they are paid on time.

 

How are Debts Being Divided?

This is a crucial inquiry since the lender will need to make a computation based on your total income less any debts when you apply for a car loan after divorce.

 

Lenders often won't permit you to carry more debt than 40% of your income, so a divorce settlement agreement must specify exactly which debts you are accountable for and which ones you are not.

 

Do you have to provide spousal or child support? If so, the lender will need to know how much you have to pay and take it into account when figuring out how much of a loan you can actually afford.

 

Opening Credit Accounts in Your name

Use this chance to begin opening new credit accounts under just your name. The majority of married couples have joint accounts, but you should begin creating your own personal credit report.

 

Reach Out to the Experts for Guidance

The dealerships have helped other Canadians in need of a car who are going through a divorce. The dealership will hand-pick the lenders who would provide you with the finest rates after getting a better grasp of your financial situation.

 

The interest rate may be slightly higher if you have credit issues, but the dealership can provide you tips on how to raise your score. You won't be under any duty and you'll at least have a clearer picture of the circumstances.

 

For those of you who know that you have a challenging credit situation, please visit Car Nation Canada where we have a team of credit specialists ready to help you get approved for a car loan after divorce today!