Getting an Auto Loan After Divorce

How divorce affects your ability to borrow for a car

Divorce changes what lenders see when they pull your credit report, and not always in ways you expect. If your ex-spouse was on the loan or the title, that debt may still show on your credit record even after the divorce is final. If you were the non-borrowing spouse, you may have no credit history at all. Either way, you are starting fresh in the eyes of a lender, and the timing matters.

Most lenders want to see that your divorce settlement is actually complete — not pending, not in negotiation — before they will approve a car loan. They also want proof that any joint debts from the marriage have been divided or paid off. A lender will pull your credit report and see both your individual history and any accounts still listed as joint. The cleaner that picture, the better your terms will be.

Key Takeaways

• Joint auto loans and joint credit card accounts stay on both spouses' credit reports until they are paid off or formally removed, even after divorce.
• Lenders typically require a final divorce decree before approving a new loan, and they want proof that joint debts have been settled.
• If you have no credit history of your own, you may need a co-signer or a secured loan backed by a savings account or down payment.
• Removing your ex-spouse from a joint auto loan usually requires refinancing the vehicle in your name alone.
• Building or rebuilding credit after divorce takes three to six months of on-time payments before most lenders will offer you standard rates.

What happens to a joint auto loan in divorce

A joint auto loan is a debt, and divorce courts divide debts the same way they divide assets. The court order will say who is responsible for paying it — usually the spouse who keeps the car. But the lender does not care what the divorce decree says. Both spouses remain legally liable to the lender until the loan is paid off or refinanced into one person's name.

This means your ex-spouse's failure to pay can damage your credit score, and your failure to pay damages theirs. If the car is in both names on the title, the lender can repossess it from either of you. If your ex-spouse was ordered to pay the loan but does not, you have a claim against them in family court — but the lender will still come after you first.

The only way to remove your ex-spouse from the loan is to refinance it. You will need to may have access to for a new loan in your name alone, using the current value of the car as collateral. If you cannot refinance, the loan stays joint until it is paid off, which can take five to seven years.

Refinancing a joint auto loan into your name

Refinancing means taking out a new loan to pay off the old one. The new loan is in your name only, and the old joint loan disappears. You keep the same car, but you are now the sole borrower and the sole owner of the debt.

To refinance, you will need to contact lenders — banks, credit unions, and online lenders all offer auto refinancing. You will need the current payoff amount from your original lender, the vehicle identification number (VIN), and proof of insurance. The lender will pull your credit report and decide whether to approve you and at what interest rate.

If your credit score dropped during the divorce or if you have little credit history, refinancing may be difficult. Some lenders will refinance with a co-signer (usually a family member with stronger credit). Others will require a larger down payment. A few will refinance at a higher interest rate than your original loan carried, which costs you more over time.

Building credit if you have no history of your own

If you were not on any joint accounts during the marriage, you may have no credit history at all. Lenders cannot approve a car loan for someone with no credit record, because they have no way to predict whether you will pay.

You have three options. The first is to find a co-signer — someone with established credit who agrees to be responsible for the loan if you do not pay. A co-signer is usually a family member, and they take real risk: if you miss a payment, the lender will pursue them. The second option is a secured auto loan, which some credit unions and banks offer. You put money into a savings account as collateral, and the lender holds it while you pay off the car loan. The third option is to build credit first, before you apply for the car loan.

Building credit takes time. Open a secured credit card (one backed by a deposit you make), use it for small purchases, and pay the full balance every month. After six months to a year of on-time payments, your credit score will rise enough that you may may have access to for a standard auto loan without a co-signer.

How your credit score affects your loan terms

Your credit score determines whether a lender will approve you, and at what interest rate. After divorce, your score may be lower than it was during the marriage, especially if joint accounts were not paid on time or if you have little credit history of your own.

Lenders typically offer their best rates to borrowers with scores above 700. If your score is between 600 and 700, you will pay a higher interest rate — sometimes 2 to 4 percentage points higher. If your score is below 600, many mainstream lenders will decline you entirely, and you may have to use a subprime lender that charges much higher rates.

The difference adds up. On a $25,000 car loan over five years, a 3 percent interest rate costs you about $1,950 in interest. A 7 percent rate costs about $4,550. Waiting three to six months to rebuild your credit before you apply can save you thousands of dollars.

Removing your ex-spouse from the car title

The title is separate from the loan. Even if you refinance the loan into your name, your ex-spouse may still be on the title. You need to remove them so that you are the sole owner.

The process varies by state. In South Carolina, you will need to go to your county Department of Motor Vehicles with your divorce decree and the current title. You will fill out an application for a new title in your name only. Bring your ID and proof of insurance. There is a fee, usually between $20 and $50. The DMV will issue a new title with your name as the sole owner.

If your ex-spouse will not sign the title over, or if you cannot locate them, you may need to file a petition in family court asking the judge to order the transfer. This is rare, but it happens when one spouse refuses to cooperate after the divorce is final.

What to do if your ex-spouse stops paying a joint loan

If your ex-spouse was ordered to pay the joint auto loan but does not, your credit score will suffer along with theirs. The lender reports missed payments to the credit bureaus, and both names appear on the report.

Your first step is to contact your ex-spouse and ask them to resume payments. If they refuse or cannot pay, you have two choices. You can pay the loan yourself to protect your credit, then take your ex-spouse back to family court to recover the money. Or you can let the account fall behind, which damages both credit scores but may force the lender to repossess the car — which removes the debt from both of you, though it also damages your credit for seven years.

The better choice is usually to pay the loan and pursue your ex-spouse in court. A damaged credit score makes it harder to borrow for anything — a house, a credit card, even a phone plan — and the damage lasts seven years. Court recovery is slower but protects your financial future.

Frequently Asked Questions

Can I get an auto loan before my divorce is final?

Most lenders will not approve you until the divorce decree is signed by a judge. Some will approve you if you can show a signed settlement agreement, but they want to see the final order. Call the lender and ask what documents they need before you apply.

What if I kept the car but my ex-spouse is still on the loan?

You need to refinance the loan into your name alone. Contact banks, credit unions, or online lenders and ask about auto refinancing. You will need the payoff amount, the VIN, and proof of insurance. If you cannot refinance because your credit is too low, ask a family member to co-sign.

Does my ex-spouse's new debt affect my credit?

No. Once the divorce is final and joint accounts are closed or refinanced, your ex-spouse's new debts do not appear on your credit report. Only joint debts that are still open affect both of you.

How long does it take to rebuild credit after divorce?

Three to six months of on-time payments on a credit card or secured loan will raise your score enough to may have access to for better auto loan rates. Seven years is how long negative marks stay on your report, but their impact fades after two to three years.

What if I cannot afford to pay the joint loan and my ex-spouse will not either?

Contact the lender and explain your situation. Some will work with you on a payment plan or loan modification. If neither of you can pay, the lender will repossess the car. This damages both credit scores for seven years, but it ends the debt. You can then rebuild credit and apply for a new loan later.