How to Transfer a Car Loan to Another Person

If you have a car loan and you want to transfer the loan to another person, is this possible? Well, that answer is not always clear cut — it can depend on the policy of your lender, especially what is laid out in your car loan agreement. Still, that possibility remains and if you are interested in transferring ownership, the following procedures can make this happen.

Your Agreement

Your car loan contract should clearly spell out whether a loan can be transferred or assumed by a new party. Examine your contract and determine whether this is possible.

key lockIf after examining the contract that you are still not sure, contact your bank or financing company for clarification. Get a hold of someone in the bank’s lending department that can pull up a copy of your loan and make a determination.

Agreement Transfer

Your lender will most likely not allow for your auto loan to be automatically assumed by a new borrower. Instead, this individual may be required to apply directly to the bank for the loan transfer. In this case, work with this individual to have the loan transferred. However, your bank may require that the future owner take out a new loan. Your purchaser will likely have to produce paperwork such as W2 stubs and income tax information to demonstrate creditworthiness. At this point, the loan application is between the purchaser and your bank.

Lender Approval

Do not attempt to transfer ownership of the vehicle to the purchaser until your bank has approved his loan application or accepted his transfer. The bank has a lien on your car anyway and the Department of Motor Vehicle will not allow the car to be retitled until after the deal is done. As long as there is a lien on the car, the bank’s name will always remain on the title.

When your bank issues a new loan or accepts transfer of your current loan, you will receive notification that the loan has been transferred or paid off. If the purchaser is turned down for a loan, then consider the deal cancelled unless he can arrange financing elsewhere or pay cash for your car.

Loan Considerations

As long as the car is in your possession, continue to make payments on your car loan. If your purchaser succeeds in obtaining a new loan or a loan transfer, get a receipt from your bank showing that your loan is paid off. Notify the DMV that you no longer own the car, removing license plates, registration and personal information from the car. Lastly, notify your auto insurance company that the car has been sold, a move that will immediately drop insurance coverage for the vehicle.

Special Note — Do not allow another person to take over payments without formally discharging your ownership duties. If something happens to the car, you will be held responsible.

Related Reading

Optional Ways to Refinance Your Car

Money Saving Strategies for Auto Loan Shopping

Comments

  1. says

    Check out there repayment schedule. Here plenty lenders are associated and offer different loan
    quotes. The borrowers have to log on to the lenders site and have to fill in the loan application form and must surrender the same to the
    lender.
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  2. says

    Sarah, you are correct. This article merely answers to “how to” part without saying that it can be done. I’d be surprised if there was any lender that would allow a transfer without paying off the old loan first and having the new borrower apply for credit separately.

  3. says

    I don’t know any lender that transfers auto loans. In most cases you would need to have the person that wants to purchase your car apply for there own financing and the original loan needs to be payed off.