Should I pay off a car loan before a divorce?
Both my future ex and I are on a car loan that is approximately $10,000 right now. Should I try to pay it off before we get divorced? What are the pros and cons of paying it off now or after the divorce is finalized?
“In short, paying your loan off before the divorce simplifies the division of assets. If you can pay it off, it may be worth doing so to prevent future stress.
If both you and your future ex are co-signers on the loan, you’ll both be on the hook for the payments. Even if you and your spouse come to specific debt agreements, in the eyes of the creditors, you’re both still responsible for the loan.
If you and your future ex can afford to, it’s better not to deal with dividing debt at all during a divorce and pay off the loan now. Then, you’ll only have to figure out how to parcel the asset.
You’ll want to look into the details of your loan, though. Some lenders charge prepayment penalties. Even if you do have to pay some prepayment penalties, it may be worth a less stressful court process to pay the loan off early. This really depends on your financial situation and how much you think lack of stress is worth.
While it adds another thing to do during your divorce, it’s a good idea to review your car insurance policy. Divorce and paying off a loan are both good reasons to evaluate your policy and ensure you’re getting the best rates.
If this feels stressful to you, don’t worry; we’re here to help. The free Jerry app compares rates from the top 50 companies and delivers the best deals to your phone in minutes. We’ll also transfer your personal information to your new provider and cancel your old policy for you.”
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