My brother recently tried to go buy a new car. They saw on his credit report that he already had a car loan. The loan is actually for me, though. Last year, I couldn’t qualify for a car loan so he got it for me. My name is nowhere on the auto loan and his name is nowhere on the title. So I have a car in my name but no loan. And he has a loan in his name but no car.
After he explained the situation to the dealership, they said it’s called a Soft Loan and it’s illegal. They said one cant have a car loan for a car that is not in his name.
Illegal for whom? For us? For the dealership? For the credit union issuing the loan?
What should be done? I actually wouldn’t mind just getting rid of the car. Could I claim the loan is illegal and demand the dealership take it back without it being called a reposession? And without getting in trouble?
Or maybe they were full of crap and nothing is wrong with the situation. Why would such a loan be illegal anyway?
Illegal may or may not be the right word. It may constitute fraud becuse your brother has taken a secured loan but someone else has the collateral. In any event taking the car back and trying to walk away from it is not an option if you don’t want to ruin your brother’s credit.
Technically a “Soft Loan” is usually described as a loan with a low interest rate and/or relatively easy terms, and it’s generally used in international finance in terms of loans made to developing countries and the like.
Re the dealer possibly the term “Soft Loan” is just in house lingo for what you described (ie borrower is not title holder) . Regarding the titling of the car under a different name than the borrowers, this has nothing to do with the dealership (unless they’re holding the paper) or the DMV, and is strictly an issue between the lending institution and the borrower as to whether he is allowed (or not) to assign ownership of the vehicle. Read the loan paper work and talk to the entity holding the mortgage. If the lender expects the car to be collateralizing the mortgage in some fashion, titling ownership to someone else, without permission, might be a no-no.
If the loan is a non-recourse loan (see below) there may well be limitations as to how he can assign title.
When we first went to get my car, I tried to use my brother as just a co-signer. We were working directly with the Ford dealership who was working with different banks to find a loan.
The salesman started with the local military credit union, thinking that my being an Active Duty Army guy might mean something to them. Well it didn’t. In fact, no one would give me a loan even with him as a cosigner. However, the credit union returned the papers saying the would approve my brother for the loan as long as my name was not on it. But the papers said I would be allowed to be on the title. My brother agreed (we’re pretty close), and so I got the car. The salesman listed me as an additional buyer on the sales paperwork (I guess since I put up the down payment, that’s not a lie).
But, knowing the car was going to be mine and mine alone, the salesman sent the tag and registration papers to the DMV with only my name on it. So everything is solely in my name except the loan.
The registration just lists me. Not “me and him” or even “me or him”. Just me.
Did the dealer do something wrong? Maybe the credit union was expecting both our names on the registration.
So who really own this car anyway??? Me? My brother? The bank? I assume it belongs to the bank since it is not paid off. But they couldn’t take it away from me if I stopped paying, could they??? They couldn’t take MY car away just because MY BROTHER’s loan defaulted. Right? But I couldn’t go sell the thing, cause I don’t get the title until it’s paid off. It’s like we all kinda own it, and at the same time, none of us do.
Im just dissappointed that I am paying off a 27,000 car loan and I don’t get any credit boost from it in the end.
The owner(s) are the names on the registration, almost surely not the credit union.
If you account is accurate, then it sounds like it was the dealer who made the mistake(perhaps intentionally) and the credit union made the error.
In any case, you apparently now know something is wrong and can possibly get in legal problems if you don’t clear it up. So if you can get a loan now in your own name, do it, payoff your brother’s loan and be sure the car and the reporting of the loan is in your name.
I reread your post again. The dealer MAY have had you sign something placing a lien on the car but you weren’t on the loan. If so, then you aren’t liable for the debt your brother is, but the credit union could remover your car in case of default.
In any case, clear it up and get your brother out of it if you can.