Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

Getting my name off the loan

Dear Dr. Don,
I am financing a car for my boyfriend. The loan is in my name, but my boyfriend makes all of the payments. How can I get the car transferred over to his name and get my name off of the loan?
Misti Mustang

Dear Misti,
The best way would be to sell the car to your boyfriend at a price equal to the loan's payoff balance. For this to work, he has to be able to get a used-car loan in his name for that amount.

If his credit isn't good enough to get the loan, then co-signing the note with him isn't the answer. Co-signing the loan keeps you obligated to make the payments if your boyfriend stops. The only potential benefit to co-signing the note accrues to your boyfriend. His payment history would then be reflected on his credit report. A good payment history would strengthen his credit file and help him get approved the next time he applied for a loan.

If the car's value is less than the loan payoff amount, you are upside-down in the loan. With most lenders he would have to come up with the difference in cash to get the loan. That's actually a good thing because car loans are secured loans, collateralized by the value of the vehicle. When a lender loans him more than what the car is worth, the lender has to be compensated for taking on that additional risk, and the loan will carry a higher interest rate.

If you're on the title as the owner of the vehicle, then you're within you rights to sell the car and pay off the loan balance. The right spin to put on this with your boyfriend is that his monthly payments would be roughly equivalent to a lease payment on the car. If you want out of the loan because you want out of the relationship, keep this alternative in mind.

-- Posted: Nov. 7, 2002