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How To Transfer A Car Loan To Another Person? Is It Even Possible?

How To Transfer Car Loan To Another Person

Auto loans serve as a significant tool in fulfilling people’s car ownership dreams. Nevertheless, life’s unpredictability can lead to difficulties in managing loan payments. In such situations, individuals might need to explore options to sell their cars. But what happens to the car loan? Can it be transferred to someone else? In this article, we will delve into the process of how to transfer a car loan to another person and explore the possibilities, including refinancing the loan for another borrower.

Can You Sign Over A Car Loan To Someone Else?

When financial hardships or life changes make it difficult for a borrower to continue making car loan payments, they might consider transferring the loan to another person. However, transferring a car loan is not as simple as signing it over to someone else. Most lenders do not allow direct loan transfers, with the same terms and rates remaining on the original loan.

Instead, the process involves the potential new borrower applying for a new loan with the lender. The lender will run a credit check to assess the new borrower’s creditworthiness and ability to handle the loan payments. If the new borrower meets the lender’s criteria, they will be issued a new loan, effectively taking over the existing loan.

What If The Person You’re Transferring to Has Bad Credit?

One common concern when transferring a car loan is whether the new borrower has bad credit. A poor credit score might make it challenging for the new borrower to qualify for the loan transfer. However, some lenders might be more flexible, and the new borrower could still be eligible to assume the loan with certain conditions.

If the new borrower has bad credit, they may need to present a co-signer with a better credit standing to increase their chances of approval. The co-signer will share responsibility for the loan, providing the lender with added security. However, co-signing is a significant commitment, and both parties must fully understand their responsibilities before proceeding.

How to Change A Car Loan To Someone Else

The process of transferring a car loan to someone else requires following a set of steps for a seamless transition. Here’s a comprehensive guide on how to do it:

  1. Check Loan Agreement – Begin by reviewing the loan agreement to determine if a loan transfer or assumption is permitted. If it is, continue the next steps.
  2. Find a Suitable New Borrower – Look for a responsible individual willing to take over the car loan and car ownership. Offering an attractive deal might entice potential buyers to consider the loan transfer.
  3. Assess Borrower’s Credibility – Make certain that the prospective borrower possesses a steady income and an impressive credit score. Lenders will demand evidence of income and a solid credit background.
  4. Contact Car Dealerships – If finding a suitable buyer independently is challenging, reach out to car dealerships for potential buyers interested in used vehicles.
  5. Transfer Car Registration – Visit the Regional Transportation Office (RTO) to transfer the car’s registration to the new owner’s name. This process may take a few weeks, and fees might apply.
  6. Insurance Requirements – Verify that the new borrower meets the insurance requirements and transfers the insurance policy to their name. This avoids unnecessary premium payments by the original borrower.
  7. Submit Documents – The new borrower must submit the necessary documentation to the lender, including a loan transfer application, identification, address proof, and income verification.
  8. Fees – Inquire with the lender about any processing or transfer fees associated with changing the loan borrower.

Other Options of Transferring Car Loan to Another Person

In addition to directly transferring a car loan, there are other options to consider when seeking to transfer the loan burden to another person. Here’s a closer look at the other options:

1. Refinancing A Car Loan to Another Person

You can try refinancing the car loan to someone else. Refinancing entails the new borrower seeking a fresh loan to settle the current car loan. The main goal of refinancing is to obtain improved loan terms, like reduced interest rates or longer repayment durations. This can potentially make the loan more manageable for the new borrower. But until the refinanced loan is fully paid off, the original borrower’s name will remain associated with the loan.

2. Cosigning with the New Borrower

Another way to transfer a car loan to another person is by having the new borrower cosign the loan with the original borrower. In this situation, both individuals share equal responsibility for the loan, and the new borrower becomes a co-borrower on the original loan. The cosigner’s creditworthiness can potentially improve the loan terms and make it more manageable for the original borrower. However, if the new borrower misses payments or defaults on the loan, it will negatively impact both the original borrower’s and the cosigner’s credit scores.

3. Selling the Vehicle Privately

If transferring the car loan to another person proves to be challenging, selling the vehicle privately may be a viable option. You can use the proceeds of the sale to pay off the existing loan. If the selling price is higher than the remaining loan balance, the surplus amount can be used for other purposes or as a down payment on a less expensive vehicle. If the selling price, though, is lower than the outstanding loan balance, the original borrower will need to cover the difference to fully pay off the loan.

4. Voluntary Repossession

In extreme financial circumstances where the original borrower is unable to continue making loan payments and cannot find a suitable buyer, they may consider voluntary repossession. This involves returning the car to the lender voluntarily. While this option can relieve the burden of making payments, it comes with severe consequences for the original borrower’s credit score. Voluntary repossession will be reported as a negative mark on the borrower’s credit report and can significantly damage their creditworthiness.

5. Lease Transfer

If the original borrower is leasing the vehicle rather than financing it with a loan, some leasing agreements allow for lease transfers. In a lease transfer, the new individual takes over the remaining lease term and payments. This can be an attractive option for the new borrower, as they may benefit from a shorter lease term or a lower monthly payment compared to starting a new lease from scratch. However, like transferring a car loan, lease transfers typically require approval from the leasing company and may involve fees.

Bottom Line

Transferring a car loan to another person is indeed possible, but it involves a series of steps and considerations. Most lenders do not permit direct loan transfers; instead, the new borrower typically applies for a new loan. The process also involves transferring car ownership and updating insurance policies. Those considering this option should carefully review their loan agreements, assess potential buyers’ credibility, and communicate with the lender to understand the transfer process fully.

In conclusion, while transferring a car loan may be challenging, it can provide relief for borrowers facing financial difficulties. However, it is essential to explore all available options and consider the long-term implications before proceeding with a car loan transfer.


  • RJ Sinclair

    RJ is our resident money guru, with a knack for keeping finances neat and organized. With previous experience as a budget manager in supply chain companies, he brings a wealth of knowledge and expertise to the table. Count on RJ as a trustworthy source for valuable money tips and advice to help you make the most of your financial journey.