If you’re in need of a car loan after divorce, there are a few things you must bear in mind in order to successfully navigate this.
After a divorce, your finances may take a significant hit. All of these expenses affect the maximum car loan amount you can qualify for; many lenders will not authorize a car loan if your obligations surpass forty percent of your income before taxes.
If You Have a Joint Car Loan
If you have a joint car loan, you have options but they depend on whether you can settle everything between you amicably or not.
You can:
Sell the car and repay the loan – Selling the car to repay the loan means a clean slate for both of you. You can then either buy a car with any equity you walk away with or apply for a new car loan in your name alone.
Refinance the car loan – If one of you agrees to take the car, you can purchase your spouse’s share with a new loan in your name.

Let the court decide – This is the least palatable option and usually the least satisfying. If you are not on good terms with your spouse or cannot agree on how to handle the car loan, it can form part of the divorce proceedings.
If you decide to refinance or go to court, we recommend discussing it with your lender beforehand. Even if it’s to warn them that your circumstances are changing and that you may be paying the loan off early.
This builds goodwill with your lender which could save a lot of hassle when it comes to refinancing or a missed payment.
Income & Credit Score
Do you make a good living? Perhaps you were a stay-at-home parent or did not work full-time during the marriage. Your income may not be large or adequate to qualify for a car loan after divorce. You should have been employed for a minimum of ninety days and have sufficient income to fulfill your basic necessities, plus the automobile payment.
What is your credit score currently? Utilizing free services such as Credit Karma to monitor one’s credit score is fiscally sensible.

There is a considerable likelihood that your credit score declined during and immediately following the divorce; a lower credit score implies you’ll pay a high interest rate on anything you finance. A decent credit score is anything above 680, so you will need to work diligently to lower your debts while making sure they are paid on time.
How are the Debts Being Divided After the Divorce?
This is a key question because when you apply for a car loan after divorce, the lender will need to do a calculation based on your total income less any debts.
Lenders will usually not allow you to carry more than 40% debt-to-income so there must be a divorce settlement document that clearly states what debts you are responsible for and which you are not.
Are you required to pay child support or spousal support? If you are the lender will need to see how much you are required to pay and factor that into their calculations when trying to determine what is the maximum loan you can afford.
Opening Credit Accounts in Your name
You should take this opportunity to start opening new credit accounts in only your name. Most married couples have joint accounts but you need to start building your own individual credit profile.
Reach Out to the Experts for Guidance
The dealerships have assisted other Canadians going through a divorce and in need of a vehicle. After gaining a better understanding of your economic standing, the dealership will hand-select the lenders who would offer you the best rates.
If you have credit concerns, the interest rate may be slightly higher, but the dealership can advise you on how to improve your credit score. There is no obligation, and you’ll at least have a better understanding of the situation.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan after divorce today!