EPS 18 - Getting Someone off your Auto Loan

Jerry talks about removing your co-signer or co-borrower off of your auto loan.

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Episode Transcript

UNKNOWN (00:01):
Thank you.

SPEAKER_02 (00:37):
hey hello hello

SPEAKER_01 (00:55):
this is jerry and welcome to the pink money
podcast where we talk all aboutthings related to money from a
gay perspective.
And, you know, a friend of minewas asking me about his little
sister who she said she wastrying to get her car just put
in her name.

(01:15):
And she was a little confusedabout how to do that because she
just didn't want to have...
She just wanted the car to be inher name only.
So she had total control overit, which is fine, right?
And...
what that really means in thatcase is you have to work with
the lender.

(01:36):
So if there's a loan on it andthe bank is holding that note,
then you have to get the bank torelease the cosigner.
And if you owned it in jointnames, let's say, you know, you
and Bob, then you have to getBob off of it, which is fine
too.
But again, The only way the bankis going to let either the

(02:00):
co-signer or Bob off of it isyou're going to have to qualify
for that loan yourself.
So if you're ready to do that,then you just put an application
into the bank and tell them whatyou're trying to do, and they
should be able to just simplytransfer that title into your

(02:20):
name.
Now, if Bob owns that car alongwith you, He may not want to
give that up easily, and so youjust have to negotiate something
with Bob.
I don't know.
Maybe you have to pay him off,or I don't know.
Maybe he's just willing to getoff of it.
So that just really depends.
So nevertheless, if it's just afamily member who's co-signed

(02:44):
for the loan, then again, thebank will probably let you put
that in your own name if you'vehad a good track record of...
paying the bill on time, everytime, every month.
So that also goes to speak towhat your credit looks like.
So usually the bank is alsogoing to pull your credit report

(03:07):
and they're going to take a lookand see, you know, if there's
anything else that's gone awrysince the last time they looked
at your credit report when theyinitially gave you the loan or
maybe hopefully things haveimproved and your credit score
has gone up.
So if you're unsure, one of theeasy things you can do is go to
annualcreditreport.com.

(03:30):
You're entitled to a free creditreport every year from the three
major credit reportinginstitutions, Experian, Trans...
Oh my God, I just drew a blank.
TransUnion, there you go.
So Experian, TransUnion, andEquifax.
There you go.

(03:50):
So anyway...
you have to get a copy of yourcredit report from each of the
three and you just want to combthrough it and see if there's
any mistakes.
If there's anything that'swrong, you need to dispute it.
And that will typically takeabout 30 some days, but you
won't get your score.
And I think I've mentioned thisbefore.
You have to buy your score andyour score is probably going to

(04:11):
cost you less.
Things have changed.
It used to be about$15.
I don't know.
Like everything has probablygone up.
I haven't checked that in quitea while, but nevertheless, you
just buy your score and you,probably don't even need to get
it from all three.
And it doesn't mean, though,that that's a be-all, end-all
either because if you get yourscore and, you know, let's say
it's in the, I don't know, thelow 600s.

(04:35):
So the bank in their lendingcriteria may, and they probably
will, use other criteria to rateyou as a good borrower And with
whatever criteria that they use.
So what I'm saying is theyusually strictly don't go off of

(04:56):
just the credit report.
But, you know, just reallydepends.
And the bank really isn'tprobably going to tell you
exactly what their criteria is.
But, you know, every institutionhas a little bit different
scoring system.
But anyway, it's always a goodidea to keep your...
relationship strong with yourcredit union or whatever bank

(05:20):
you use.
And that means that when you dodecide that you need some help
and maybe your credit isn't asstrong as it needs to be, then
usually working with someone andthey can put a face to a name,
et cetera, then they may be alittle bit more lenient with
you.

(05:40):
Now, who knows, you know, theymay ask you to put a little
money down as well, buthopefully they don't.
And it all depends on what thevalue of this vehicle is as
well, because although you'veprobably been paying it down,
the other thing about vehiclesis, of course, a decrease in
value as well.
So you want to be able to getthe loan and you want to make

(06:02):
sure that the car is in goodcondition so that the bank, when
they do lend you the money, ifyou, you know, for whatever
reason, God forbid, quit paying,uh, the bill, then you want to,
um, they're, they're going towant to make sure that the car's
in good condition because ifthey had to repossess it, then
they're going to sell it andthey're going to get whatever

(06:22):
they can for the car.
And then you're going to knowthe difference between how much
you owe on the bank loan and howmuch the, they were able to get
at auction for your car.
So, I'm just saying that'ssomething to take in
consideration.
The other thing I wouldrecommend is if you do end up

(06:45):
refinancing the vehicle with thebank in your own name, you know,
my bet, my recommendation wouldbe to also ask about gap
insurance.
And what gap insurance does iscovers that gap, let's say
between the note and the valueof the vehicle.
And that, will be important if,let's say, for some reason that

(07:08):
there is an auto accident withyour car and the value of the
car is a lot lower than how muchyou owe on it, how much you owe
on the loan.
So let's say you owe$5,000 andbecause of the auto accident, et
cetera, maybe even before that,The car was only really valued

(07:32):
at, let's just say, you know,$4,000.
So there's a$1,000 difference,and a gap insurance will cover
that difference.
And it's really pennies on thedollar in the grand scheme of
things.
And sometimes, I mean, I guessit depends on the institution,
that they will come out and justoffer that to you, or you have

(07:53):
to just...
be aware that it's somethingthat you would want to ask about
and say, hey, I would like tobuy a gap policy for this.
And hopefully they will.
If they don't for some reason,then the best thing you can do
is go into the generalmarketplace and buy a gap
insurance policy.
Now typically you have to dothat pretty quickly, and I would

(08:16):
say quickly means probablywithin the first 30 days of
owning that car, taking out thisloan.
So...
They're not going to usually letyou take out a gap policy six
months or a year into owningthis vehicle.
I'm just saying they don't wantto be out there trying to
provide you with this gapinsurance policy if the car is

(08:39):
not really going to be worth itand who knows what's going on.
Anyway, so just if you're tryingto get somebody off of a loan,
the only way the bank is goingto let you off...
let that person off the loan isif you can qualify on your own.
So as long as you have a good,strong income and your credit is

(09:03):
not terrible and maybe have someadditional resources on the
side, possibly may or may not benecessary, and you don't have
too much outstanding debt.
Um, so if you have a lot ofcredit cards that have high
balances, et cetera, that willprobably weigh negatively on
you.
And of course that will bereflected in your credit score

(09:25):
as well, because, you know,credit utilization is about 15%
of your score.
So you want to keep yourbalances under 50% on all your
credit cards.
And of course, like I said, thebiggest part of that is paying
your bills on time, every time,every month.
So, um, Just in summary, gettingsomebody off the car loan is not

(09:49):
too terribly difficult.
You just have to qualify on yourown.
And then once the bank allowsyou to take full possession of
the car, then they're going togive you a title that will be
eventually just in your nameonly when the loan is paid off.
So you won't have to try to getanybody else off the loan.

(10:12):
title later on down the road.
That can always be tricky anddifficult.
So don't forget about the gapinsurance and also don't forget
to keep while you have the carin full coverage because you
don't want to find that you'vebeen carrying only liability and
then you have an accident andthe car doesn't get paid off or

(10:34):
fixed.
So that would be a terriblesituation.
Usually the bank is going torequire that you have full
coverage while you have theloan, but it's still just a good
idea that you have fullcoverage.
And when you take out that fullcoverage with your insurer, you
want to make sure that youreview that insurance on a

(10:55):
regular annual basis, meaningevery year.
talk to your insurance agent orcall the insurance company and
just double check and make surethat they haven't changed the
policy in any way, shape or formon your car and that you have a
deductible that you're able tomeet.
So meaning I've seen deductiblesthat go up to$1,000,$1,500,

(11:19):
etc., That just means yourpremium is going to be a little
bit lower, but if you don't have$1,500, et cetera, at the time
that you need it, then thatwasn't very helpful at all.
So try to keep your deductiblein a reasonable amount as long
as you can afford it.
That's what I'm saying, in areasonable, affordable amount.

(11:40):
So if it's$500, just make sureyou got$500 stuffed away
somewhere.
So that's my recommendation toyou.
That's all pretty much it.
Hopefully you find that a littlebit helpful.
You know, it reminds me similarabout topics about refinancing
the house.
And some of what I told youabout pretty much everything I
talked about is really just thesame.

(12:02):
If you're trying to get somebodyoff of a title of a home, it's
just exactly the same thing.
You have to qualify on your own.
and like in a divorce, etc.,then you're going to have to
make sure that you can affordthe home and that the loan terms
are in your favor.
And that really means in asituation where you have
changing interest rates like wedo now, where interest rates are

(12:24):
fairly high, you may not begetting the same favorable rate
that you had when you originallytook out the loan.
That's just how it goes.
So the better...
credit score you have, then thelower your interest rate is
going to be.
And the more shopping you'reable to do, if your credit is
not so good or terrible, themore difficult time you're going

(12:45):
to find all the way around andyour interest rates are going to
be pretty high.
Now, I'll just throw this onelast thing out.
If let's say that is the casethat they will go ahead and
allow you to take out the loanand kick the other borrower off,
but the interest rate is goingto be high.
I'd say go ahead and do it.

(13:05):
So yes, it's expensive, butyou're not going to let that
loan remain that loan with thathigh interest rate forever.
So eventually interest rateswill drop.
This is a temporary situationwe're in.
But you want to go ahead andjust bite that bullet and get
that other person off.
And then you can alwaysrefinance these loans later on

(13:27):
down the road with morefavorable interest rates when it
presents itself.
And you can always look to forsometimes a variable rate.
I don't usually recommendvariable rates because anything
can happen with interest ratesand then you could find
yourself, you know, in aprecarious situation.
However, if the likelihood ofinterest rates going down is

(13:51):
pretty good, then, you know,maybe worth it.
Now, in the case of where we arenow, right now in today's world
where interest rates have beengoing up and, you Even though
the Fed has, you know, beentrying to keep inflation at bay,
they haven't been able to reallytame that animal yet.

(14:12):
So what they've been doing israising interest rates, and that
just hurts you all the wayaround with your credit card
rates and your car loan ratesand your mortgage rates, et
cetera.
So even though they're notpegged, you know, one-on-one,
nevertheless, as in an interestrate environment where, you
know, the– Inflation is high andthe Fed has had a tendency to

(14:36):
raise interest rates.
You're going to be paying more.
That's all I'm saying.
And eventually, though, youshould be able to refinance
that.
And you might be taking it inthe shorts, as they say, a
little bit.
But still, it may be a betteridea to get that person off
sooner rather than later becausethere's lots of reasons why.
And I'm sure everybody has theirreasons why they want to only

(14:58):
have something in their nameonly.
So...
Hopefully that helps, like Isaid.
All right, guys, that's it forme.
You guys have a great day, andwe will be talking later.