Getting a Car Loan as a Married Couple: A Complete Guide

Purchasing a vehicle is often one of the largest financial decisions a married couple will make together. And figuring out the best way to finance that car as a married couple requires some careful thought. Should you apply individually or jointly? Does it make sense to have one spouse co-sign for the other? What are the pros and cons of combining incomes on an auto loan application?

Below we’ll explore everything married couples need to know about getting a car loan together. We’ll cover

• Joint vs individual auto loans for married couples
• The pros and cons of co-signing on a spouse’s car loan
• Tips for qualifying for a joint auto loan as a married couple
• What happens if you divorce after taking out a joint car loan
• Removing a spouse from a car loan after marriage
• Frequently asked questions about married couples and auto loans

Let’s get started!

Joint vs. Individual Car Loans for Married Couples

Married couples have two main options when it comes to applying for a car loan – individually or jointly. Here’s an overview of how each works:

Joint Auto Loan

• Both spouses apply together on one loan application

• Income, debts, assets, and credit history of both are considered

• Both spouses are co-borrowers and appear on loan contract

• Lower monthly payment by combining incomes

• May qualify for lower rate by blending credit scores

Individual Auto Loan

• Each spouse applies for separate loan individually

• Only applicant’s income/debts/credit history considered

• Monthly payments may be less affordable

• Could result in higher interest rate if one spouse has poor credit

• Keep financial responsibility for the loan separate

Joint loans allow you to pool resources for potentially better loan terms, but individual loans compartmentalize the financial liability.

Pros and Cons of Co-Signing a Spouse’s Car Loan

Instead of a joint loan, one financing option is to have one spouse co-sign on the other’s auto loan. Here are some pros and cons of co-signing on a spouse’s car loan:

Pros

• Improve chances of approval if co-signer has better credit

• May qualify for a lower rate based on co-signer’s credit

• Make monthly payments more affordable by using dual income

• Share responsibility of loan and keep both spouse’s credit tied to it

Cons

• Co-signer is equally responsible for repayment and defaults

• Entire loan shows up on both credit reports

• Refinancing difficult without co-signer’s involvement

• Legal process usually required to remove co-signer

Co-signing can help your spouse if they have bad credit, but it links your finances and requires both to be involved in any future changes to the loan.

Tips for Married Couples Qualifying for a Joint Auto Loan

To set yourselves up for approval on a joint auto loan application as a married couple, follow these tips:

• Have at least one spouse with good credit (670+ score)

• Make sure your front-end debt-to-income ratio is below 15% if possible

• Reduce revolving credit card balances before applying

• Provide proof of dual income from paystubs, tax returns

• Pick a comfortable loan term so payments aren’t too high

• Make a larger down payment if you have significant assets

• Shop lenders together and compare joint loan offers

Meeting the lender’s debt-to-income limits is essential to getting approved together for a joint car loan. Having one spouse with a strong credit score can offset the other’s weaker score.

What Happens if You Divorce After a Joint Car Loan?

If you and your spouse apply jointly for an auto loan but end up divorcing down the road, what happens to the loan? Here are some key things to know:

• Both spouses remain responsible for the loan until it’s paid off or refinanced.

• The loan continues reporting to both spouse’s credit reports.

• The spouse keeping the car will need to refinance the loan solo to remove the ex-spouse.

• If refinancing isn’t an option, the car loan must continue to be paid jointly.

• Missing payments could negatively impact both spouses’ credit scores.

This underscores the importance of only entering into a joint auto loan if you’re certain you and your spouse have a solid financial partnership.

How to Remove Your Spouse From a Joint Car Loan

If life circumstances change through divorce or separation, you may need to remove your spouse from a shared auto loan. Here are a couple options to take them off the contract:

• Refinance the loan – Apply to refinance the loan in only your name. You’ll need income to support the loan solo plus a strong credit history.

• Trade in or sell the car – Using proceeds to pay off the loan closes it and releases both parties. You’d need to purchase another car after.

• Make extra payments – If permitted, pay down principal faster so you can pay off the loan early.

• Default and voluntary repossession – Missing payments triggers default, allowing lender to repossess the car and close loan. Major credit damage.

Refinancing the loan without your spouse is the best route, but you may not qualify alone. Review all options to find the path forward.

Frequently Asked Questions about Married Couples and Auto Loans

Can a married couple get a car loan together?

Yes, married couples can absolutely apply jointly for an auto loan together. This allows them to combine their incomes, which may result in better interest rates and loan terms. It also spreads responsibility for the loan across both spouses.

What happens if one person stops paying on a joint auto loan?

If one spouse stops making payments on a joint car loan, it will negatively impact both individual credit scores. The lender can potentially pursue collections against both people on the loan, not just the non-paying spouse.

Is it better to co-sign or get a joint married auto loan?

A true joint auto loan where both spouses are co-borrowers is usually better than having one spouse simply co-sign. With a joint loan, both have equal ownership of the car and loan responsibility. On a co-signed loan, the co-signer has no rights to the car despite taking on liability.

Can I remove my spouse from our joint car loan?

Yes, it is possible to remove your spouse from a joint auto loan, but it can be challenging. The easiest method is to refinance the loan in only your name. You may also need their cooperation to sell or trade in the car to pay off the existing loan.

What credit score do I need for a joint married auto loan?

Lenders usually want to see at least one spouse with good credit, typically a score of 670 or higher. If both have poor credit, you may need to take steps to improve your scores before applying jointly.

The Bottom Line

Getting an auto loan as a married couple allows you to combine incomes for improved approval odds and lower rates. Just be sure both spouses are fully committed before pursuing a joint car loan and understand what happens if you later separate.

If one spouse has great credit, co-signing may make more sense than joint borrowing. Compare all your financing options to make sure you pick the best loan structure for your situation.