Discover whether it’s possible to transfer a loan to a family member and the steps involved in doing so.
There are several reasons why it might be advantageous for you, your family member, or both to think about moving a car loan to a dependable relative. Find out if it’s a realistic option, how to go about the process, and what other options there are.
If you can no longer afford your monthly car payment, you might be wondering if you can transfer a car loan to another person. Here’s what you should know.
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Automobile loans can become a substantial financial burden in the event of a personal emergency or an economic downturn. A borrower may be wondering if they can transfer a car loan to another person if they are unable to make their monthly car payment. Occasionally, people own a car that they don’t use as frequently as they had anticipated. Whatever the reason, it’s not always easy to transfer a car loan to someone else, though there are some situations where it can.
Can You Transfer Car Loan to Another Person?
The majority of lenders won’t just move a car loan from one borrower to another with the same terms, rates, and payments still in place on the first loan Usually, the lender must be notified when the registration and title transfer to a new owner. A new loan is issued using the credit score of the new owner after they verify through a credit check that they can afford the payments.
Although the majority of lenders disapprove of assumptions made on auto loans, in certain situations, some lenders might permit a loan takeover. The new borrower may effectively apply for a new loan as long as they complete an application to determine their eligibility to take on the debt of the vehicle and payments.
When Is Transferring a Car Loan in Your Best Interest?
Transferring a car loan to another person can be done for a variety of reasons, not just financial ones. Some of these reasons might include:
- You didn’t need the car anymore after using it for a limited time (like while attending school).
- You don’t have time to sell the car because you’re moving abroad.
- You don’t use your car as much as you had anticipated because you live in a place with excellent public transportation.
- Someone in your family is in need of a car and is prepared to take up your payments.
- You want to purchase a cheaper car
- You cant afford the monthly car payment any longer
- You are in danger of having the car repossessed
What Are The Steps to Transfer a Car Loan?
It’s a good idea to carefully review your original loan agreement to check for any specific terms that forbid auto loan transfers or assumption of debt. Next, get in touch with your current lender to let them know what’s going on and ask if they would be willing to transfer the loan to someone else. Inquire about the next steps, the criteria, including the minimum credit score, any limitations, and any costs related to transferring the loan.
If they do agree to transfer the car loan:
- Fill out the paperwork. The prospective new owner must submit a new loan application to the existing lender in order to finalize the car loan transfer. They must pass the loan approval procedure, which includes a credit check, in order to be permitted to take over your auto loan.
- Transfer ownership. As proof of ownership, you must transfer the title to the new borrower’s name once the loan transfer is authorized. On the reverse of the title, there should be printed instructions on how to transfer ownership to a new owner. If not, you will both have to visit the Department of Motor Vehicles (DMV) and complete the necessary paperwork in order to formally change the title. Youll need valid IDs and a bill of sale.
- Update registration and insurance. Before driving the vehicle, the new owner must register it and get insurance in their name.
If the lender does not agree to a loan transfer, you can:
- Cosign. Simply having the new owner cosign when refinancing the vehicle loan is a simple method of transferring an auto loan. The loan payments would then fall under the purview of the new owner. This might be particularly useful if you plan to return the car at a later time or are transferring the auto loan to a family member. However, if the new borrower missed payments or defaulted on the refinanced loan, you, the original borrower, might still be liable for the debt.
- Sell the car. To purchase the car from you, the new borrower will need to obtain a personal loan or a private party auto loan. You give ownership to the new owner after directly repaying the existing lender. If you pay off your loan early, you might be required to pay early termination or pre-payment fees.
- Trade your car in. If your only goal is to reduce your payments, you can basically transfer your auto loan when you trade in your car for a less expensive model at the dealership. Prevent building up negative equity or refinancing the remaining amount of your old loan with a new one.
What Fees or Costs Are Associated With Transferring a Car Loan to Another Person?
There are going to be extra costs every time you take out a loan. Application fees, closing costs, and transaction fees are all possible during the loan process and are typically borne by the new borrower. Additionally, if the loan is transferred, the lender may assess an administration or transfer fee.
There might be a fine or fee if any monthly payments were missed. Before the auto loan is transferred to the new borrower, those must be paid off.
Additionally, there is a fee associated with registering the car with the state for the new owner. The cost of state registration varies by county and state and can be anywhere from $10 to $180. A thorough state-by-state guide on vehicle registration fees is available from the National Conference of State Legislatures.
If a new borrower is willing to work with your lender and has excellent credit, you may be able to transfer an auto loan to them, depending on the lender and the circumstances. But the process can be complex. If your lender says, “Yes, we will let you transfer your car loan to another person!” these pointers should be helpful. This website is solely intended for educational purposes. The listed third parties are independent of Capital One and exclusively accountable for their views, goods, and services. Capital One does not offer, support, or guarantee any of the above-mentioned third-party goods, services, advice, or information. Although it was thought to be accurate at the time of publication, the information in this article is subject to change. The images displayed are merely for representational purposes and might not accurately depict the product. This website’s content isn’t meant to offer financial, legal, or investment advice, or to suggest which Capital One products or services would be best for your particular situation. If you would like specific guidance regarding your particular situation, you should speak with a licensed expert.
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FAQ
Does transferring a car loan affect credit score?
To collect what you owe, the lender will attempt to sell the car. This still appears as a negative mark on your credit report. You might also be responsible for the difference if the lender is unable to sell the car for the amount you owe.
Can I transfer my loan to another person?
Although it is uncommon for lenders to allow loan transfers to other individuals, they do offer personal loan balance transfers, which allow borrowers to move their outstanding debt to another lender. Therefore, it is wise to first inquire with your lender about whether or not they accept balance transfers for personal loans.
Can I refinance my car in someone else’s name?
Technically, you can refinance a loan in someone else’s name, but doing so is difficult and there’s no assurance that your refinance applications will be accepted by lenders. You must add a co-signer to the loan and the title of your car in order to refinance it.
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