How do you transfer a car loan? Is it even possible to transfer a car loan to another person?
However, there are certain situations where a lender may allow it. For example, if you’re moving to another country, are in a personal financial crisis, or are giving the car to another person as a gift.
Here’s what you need to know about transferring your car loan and how you can decide what to do if you can’t afford your monthly car payment.
With the cost of insurance, gas, and maintenance, owning a car is incredibly expensive. But if your monthly payments are getting too high, what can you do? Is it possible to transfer your car loan to another person and walk away?
In this guide, we’ll look at: if and when a car loan can be transferred to someone else, how to make it happen, associated fees, and other options for borrowers looking to get some relief from their monthly auto loan payment.
There are some situations where a lender may agree to transferring a car loan. It will depend on the language of your loan contract and there may be fees associated with it.
Situations where a transfer may be allowed:
You are moving overseas and do not have the time to sell your car properly.
You are in a very tight financial spot and need to get out of your loan agreement immediately.
Your car loan will have language in it that pertains to transferring your loan. If your car loan is “assumable”, then it can probably be transferred to another person. But if you are unsure of the language in your contract, be sure to contact your lender and explain your situation.
The terms of a car loan are based on a number of factors, and perhaps the biggest factor is the financial situation of the applicant.
Better terms, conditions, and car loan annual percentage rates (APRs) are offered to people who have a good history of making on time payments. The better your credit score and credit history is, the better your loan terms will be.
Transferring a loan to someone else means that they will assume the exact loan and loan terms that you have, even if they have a drastically different financial history than you. If their financial situation is worse than yours, then the lender is taking on a greater risk without any compensation. If their financial situation is better than yours, then they are getting unfavorable terms.
When you sell a car that is still being financed, a lender will instead look at the new borrower’s information and make a loan offer based on that. They will issue a new loan that is separate from your agreement entirely.
If, for whatever reason, your specific circumstance means transferring your car loan makes the most sense, you’ll need to:
Discuss the transfer with your lender.
Have the new borrower apply.
Transfer the loan and the title.
If you are allowed to transfer your car loan (and even if you aren’t allowed), your first step is to call up your lender and discuss your situation. If there is language in your loan terms that excludes it, you may still be able to talk them into it. The worst they can do is say no. If your loan is assumable, there will be conditions of the transfer.
The new borrower will have to meet their minimum credit score and any other criteria that the lender may have in place. The lender will review their application and determine if they will allow the transfer.
When all of the paperwork is done, the lender can formally transfer the loan and you will need to transfer the car’s title. You should visit your state’s Department of Motor Vehicle to determine what you will need to do this. Typically you will need to have the bill of sale, registration, and money for the transfer fee. Be sure to transfer the title as soon as you can to avoid any problems. Contact your insurance company as well to remove the car from your policy and have the new owner insure the car themselves.
If you are allowed to transfer your car loan, there will be additional fees. The new borrower will most likely be responsible for them, but they may include:
Application fee
Transaction fees
Closing fees
Fees for missed or late payments
Registration fee (for the new borrower to register with the state)
While you may find that you can transfer your balance to a credit card, it is not recommended.
If you are offered a 0% introductory APR for a credit card, you may wonder if you can transfer your loan balance to your credit card and save on interest. A card might offer you a low APR and cash back, both of which sound appealing when money is tight. However, while this may be a viable option for some exceptionally financially responsible people, there is a significant disadvantage: missing a payment can be catastrophic.
A missed or late payment could result in a skyrocketing APR that will put you in a much worse position than you were in previously. Refinancing your car loan is a safer option that does not come with the risk of a missed credit card payment.
If you are unable to transfer your car loan to another person, there are other steps you can take to get yourself into a situation that works better for you.
If you’re hoping to get rid of your loan because of financial difficulties, you may want to look into a deferment.
Deferring your payments for a few months will pause your loan and allow you to catch up. It’s important to keep in mind that you will still accrue interest during this time, but it’s an easy and temporary way to get out of a tight spot.
Perhaps the most straightforward way to deal with high monthly car payments or a loan with terms that don’t work for you is to refinance your car loan.
Refinancing is when you take out a new loan with better terms and conditions that will replace your current car loan. Refinancing may help you get a lower car loan APR and can help you change your repayment period. If you lengthen your repayment period you will have more time to pay off your loan and will greatly reduce your monthly payment. This can be a great option for many people who are struggling and need a little more wiggle room.
Refinancing your car loan is easy, especially if you use a company like Auto Approve (that’s us!) that specializes in car loan refinancing. We have relationships with lenders that will help you to get the best car loan possible and experts to help guide you through the refinance process.
If you want someone else to be responsible for the car and the loan alongside you, consider adding a cosigner. You will both be equally responsible for the loan.
This might be a good option if you want to take the car back in a little while and assume sole responsibility. You will still need to refinance the loan to add a cosigner, but adding a cosigner may actually help you get a better car loan APR and better terms and conditions. When you apply for a refinance with a cosigner the lender will consider both of your finances and credit histories. So if your loved one has a better credit score than you it may help you secure a better rate.
If your car payments are decidedly too much money every month, another good option might be to trade your car in.
If you trade your car in and get a cheaper car you will lower your car payments and still have a dependable mode of transportation.
Financing a car is significantly more expensive than leasing a car.
While financing a car is great because it builds equity, leasing will allow you to have a dependable car for much less money every month. Trading your car in and leasing instead can help you pay for any fees and help reduce your payments further.
If you lost your job or have had another significant life change, it might be best to sell your car and figure out a different mode of transportation.
If things are especially difficult, refinancing your car loan may not be enough to put your finances in order. Perhaps you can try depending on public transportation for a little while, or carpooling with friends, family, neighbors, or co-workers until your situation gets sorted out.
Transferring an auto loan may be allowed in certain situations, but it is not widely offered or practiced. Instead, consider selling your car to another person or refinancing your loan with or without a cosigner. These solutions are much more likely to help you reach your end goal and reduce your monthly payments.
If car loan refinance sounds good to you, find out how much you could save by getting a quote from Auto Approve today!
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