How to Remove a Name from a Car Loan

A joint car loan can be issued with two names on the lease. In most cases, this is done because the two parties will be sharing the debt. This strategy can also be used to increase the total limit available by combining the two incomes on an application. At some point down the line, both parties may determine it is better for one to continue the loan separately. There are several avenues to take to achieve this.

Modify the Loan

In very rare cases, your current lender will allow you to modify the loan and retain the original contract. You will have to pay a modification fee in nearly every instance. This is only permitted by some lenders and for unique reasons. If one person on the loan dies, for example, you can modify the loan easily to list only the survivor. If you are a married couple going through a divorce, the lender may allow loan modification so the asset can remain with a single person who retains the right to own the car. However, establishing who has this right can be a challenge.

Refinance the Loan

If your lender does not permit any modification, you will have the option of taking out another loan to pay off the car loan in full. Once this loan is closed, both parties are relieved of their obligation. The party that took out the new loan will retain all ownership of the asset moving forward. Again, there will be fees and penalties to this refinancing and modification. You will still need to determine that one person has the legal right to close the loan and open another as a single owner of the asset. If you cannot settle this outside of court, then a judge will have to make the decision for you.

Settle the Issue in Court

A loan contract does not give priority to one borrower over another. Each has an equal stake in the debt or the asset by law. A judge may be required in order to settle the issue of who will retain the rights to the automobile if there is a dispute. The most common scenario for this problem is a divorce. In divorce court, a judge will split assets and debts. Whoever is awarded ownership of the car will go forward with the modification or refinancing to remove the other person's name from the loan.

Sell the Asset

Often, the easiest way to get out of a shared auto debt is to simply sell the car. Each party will have a right to collect any profits made. With a car, it is more likely there will be some amount still owed on the loan, which both parties must contribute to. The percentage each party contributes is determined either by mutual signed agreement or through a legal process in court. Once the debt is closed, though, the two parties will not have a legal obligation to continue the connection they shared through the joint car debt originally.


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