Can You Transfer a Car Loan to Someone Else?
- Many lenders won’t transfer a car loan directly to someone else.
- Instead, you can refinance the loan in another person’s name.
- A better option may be selling or trading your car.
Can you transfer a car loan to someone else? Probably not — mainstream lenders will almost never let you just hand your loan over to another person. But you do have other options that are basically the same as transferring a car loan.
For example, you may be able to refinance the loan in somebody else’s name. Or you could simply sell or trade the car, with the buyer taking out their own loan.
Can someone take over my car loan?
Transferring a car loan — or “loan assumption” — means someone else will take over responsibility for your loan balance.
Most lenders do not offer assumable auto loans. The few that do will usually only allow it if there’s a high level of trust between the parties, such as if a family member assumes the debt.
To find out if someone can take over your car loan, check your loan agreement to see if it says the debt is transferable — otherwise it’s probably not. If you have questions, contact your lender.
In some cases, the lender may allow a transfer if the person assuming the loan fills out a loan application and undergoes a credit check, the same as if they were getting a new loan of their own.
Reasons to explore car loan transfers
There are many reasons you might want to get out of a car loan. Maybe you’re moving and don’t need a vehicle anymore, or maybe you just can’t afford the car payments.
If someone is willing to pay your loan for you, they could just give you the money for the payments directly, or you could refinance the loan in their name (as discussed below).
Also, know that you can sell your car while you still have a loan. In this case, the buyer could take out a new loan in their own name, while you find a new car that’s more budget-friendly.
Whatever the case, if you’re behind on payments, make sure you do something — whether transferring the loan or selling the car — before you default on the car loan and your vehicle is repossessed.
How to transfer a car loan in 4 steps
Say, for example, you are selling your car and want to see if you can transfer the car loan over to the buyer. Here’s how the process might go:
Step 1: Check your options
First, you will carefully review your original auto loan agreement to see if there’s anything specifically allowing or prohibiting transfers or loan assumptions.
You’ll also want to check directly with the lender and find out about the credit requirements, the application, and any fees or restrictions for the car loan transfer.
Step 2: Have the new owner apply
The new owner will need to file a loan application with your lender in order to take over your car loan. The application will include a credit check, and the buyer will need to meet the lender’s requirements.
Step 3. Transfer ownership
You’ll also need to take care of the title to transfer a car loan to another person. Depending on the state, the title may go to the lender or to the buyer.
The title may be electronic or paper, but either way, you can get instructions from your local Department of Motor Vehicles (DMV), along with a list of which documents you’ll need.
Step 4. Update registration and insurance
The new owner will need to register the car with the DMV and insure it in their name to legally drive it on the road.
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Challenges and alternatives if transfer isn’t an option
Getting your lender to transfer your car loan can be difficult, and few lenders will allow it. But fortunately, there are several options and alternatives to transfer a car loan to another person.
Sell the vehicle
The simplest way to get an auto loan into someone else’s name is to sell the car to them.
Of course, if you owe more on your loan than what you’re getting for the car — that is, your loan is “upside-down” — then you’ll likely need to pay the difference yourself or roll it into a new car loan.
Rolling over money you owe on the last loan could also be an option if you’re trading your car in for another vehicle.
Refinance your loan
You may qualify to refinance to a better loan if your credit profile has improved — you can check your credit score for free.
Likewise, you might get a good refinancing deal if interest rates have dropped or if you apply with a cosigner.
Be sure to shop around to find a new loan with lower rates or better terms. You can try your own bank or credit union, as well as our list of auto refinance lenders.
Renegotiate terms
If you’re going through a financial hardship like the loss of your job or a sudden disability, some lenders may let you:
- Defer payments for a period of time
- Change your due date
- Stretch out the term of the loan in order to make the monthly payment lower
Going down this road comes with some risks, so have a look at our guide to debt relief for the details.
Is transferring a car loan right for you?
Transferring a car loan comes with risks for both the original borrower and the new borrower.
- Costs — There may be title and registration fees involved, as well as unpaid interest to make up. The lender might also charge a separate transfer or origination fee for the new loan.
- Higher rates — The new borrower could face a higher interest rate, resulting in larger monthly payments than the original loan.
- Financial burden — If the new borrower is doing this as a favor to you, they may feel financial stress from the responsibility.
- Credit score — The original owner and the buyer may suffer a short-term drop in their credit scores due to the credit inquiries and changes in credit score factors.
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