Help With My Car Loan – Guest Post

The Dollar Stretcher Blog

Written by: Gary Foreman

I recently bought a certified pre-owned vehicle at a dealership. Although I am not struggling to make my montlhy payments I would like to know what my other options are. I’m kind of having regrets buying the car. I don’t really want to pay for the car anymore. This was my first time purchasing a vehicle and the decision was based irrationally.

My loan is $28,000, 6 year, around 10% interest rate. The car is a 2007 Honda Civic Si Sedan.

My boyfriend is bugging me about adding his name to the title. He said he would help me with the monthly payments by matching my monthly payment. By doing this we would be paying off the vehicle faster. He also says that by doing this, it would increase his credit score. Is this true? And what are some benefits to me by doing this?

Michelle

Boy, wouldn’t that be tempting? Have someone help you pay off a car that you paid too much for. But, before Michelle jumps at the offer, she might be wise to consider a few questions. Questions that could have rather severe consequences.

To begin with, Michelle was right. She paid too much for the car. Kelly Blue Book <kbb.com> (generally considered the authority on car prices) puts the retail value of a 2007 Honda Civic Si Sedan at $20,000. Even a brand new 2009 Honda Civic EX-L has an MSRP of $24,365 and Kelly says that consumers are really paying $22,659. So, to put it bluntly, it appears that the dealer took advantage of Michelle. Thankfully, she’ll be smarter next time.

OK, so what are the questions that Michelle and her boyfriend should consider? Let’s start with the title. It’s only fair that he be added to the title. But, it’s possible that the current lien holder (i.e. the bank that loaned Michelle the money) won’t want that to happen. They made a deal with Michelle who had a good credit score – not the boyfriend who has a bad one. It’s possible that they’ll want a higher interest rate if he’s added to the title. So any attempt to add him should be checked with the bank first.

If Boyfriend is added to the title, Michelle needs to understand that there is some risk from his creditors. If he’s using this to pull up his score, it’s very likely that he has outstanding debts. And it’s also possible for those creditors to go after any of his assets (including the Civic) if he falls behind in his payments (which presumably has happened in the past otherwise he wouldn’t need to improve his score). What would Michelle do if one of his creditors put a lien on their car?

Another question they’ll need to answer is what would adding Boyfriend to the title do to the insurance rates. And, who will pay for the insurance?

With both of them owning the car, they’ll need to decide who can use it. Even if Michelle remains the primary driver, her boyfriend may want it occasionally. Who gets the car and when should be handled now, not later.

Boyfriend’s credit score should also be considered. Is this the best way to raise it. If he is added to the car loan and the payments are made on time, his score will go up. But, suppose that he borrowed $14,000 (half the car loan amount) and paid it off in a timely manner on his own. That, too, would cause his score to go up. And, it would be a much cleaner transaction.

Finally, what happens if they break up? I’m sure that they’re a very happy couple and I’m not wishing a breakup on them. But, let’s be real. Couples split up. And, if that should happen they’ll need some plan for what happens to the car and any remaining payments. Who keeps it? Is the other person entitled to any compensation for their half of the car? How much? Who makes the remaining payments? It will be much easier to come up with a plan now, when emotions are not running hot. If they do break up and don’t have a written agreement there’s a very good chance that they’ll need the court system to work out a solution.

I can’t tell Michelle and her boyfriend not to try this. There are some advantages. But, it is fraught with danger. Unless things go exactly as planned, this could be a very bad idea for them. One that has the potential to blow up their relationship and put both of them in financial peril. So Michelle should think very carefully before agreeing to this plan.

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Gary Foreman is the editor of The Dollar Stretcher.com

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