Common Questions: Can I Transfer a Car Loan?

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Oftentimes on this blog we get questions about how to get out of a car loan. This kind of question can come from many types of situations. Sometimes people have bitten off more than they can chew with their monthly car payments. Sometimes people lose their job and want to transfer the car loan to a potential buyer. And sometimes people want to return the car to the dealer. Whatever the reason is, if you’re looking to get rid of your car loan, you should know that there are ways to do it.

However, for come car loans, the contract prohibits you from transferring the loan. But don’t despair; even if you can’t transfer your car loan, there may still be actions you can take to get out of it.

First let’s look at how to transfer a car loan and then examine some of the alternatives:

How Do I Know if I Can Transfer a Car Loan?

Some lenders allow the transfer of a car loan to a “qualified” buyer. Your first step is to read through the fine print in your car loan contract and find out if it allows a loan transfer or not. If there’s a lot of fine print and you can’t find an answer, then you’ll want to contact your lender directly (via phone or in person) and ask them.

If your lender does not allow a car loan transfer, then you can still get out of the loan. You will need to sell your vehicle in order to do so, and you should bring the person who you’re selling the vehicle to with you to the dealership or financial institution in order to do a car refinance.

How to Transfer a Car Loan Or Sell Your Vehicle

Whether your car can be transferred or whether you’re going to sell and refinance the vehicle, you’ll need to follow basically these same steps:

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1. Find Someone to Transfer/Sell the Car Loan to: You may already have someone in mind, such as a family member. Or maybe you need to find someone to assume your loan from you. In this case, you might need to sell someone on the benefits of buying a used car from you, like avoiding the hassle of a dealership and potentially not having to come up with a down payment. But you cannot find just anyone; this person must meet certain criteria. For example, they likely need a credit score as good or better than yours. They also will need to have acceptable insurance coverage (dictated by the requirements of the contract and lender).

2. Choose Whether to Modify with Your Lender or Get a New Lender: You can modify your loan with your existing lender, or choose a new lender altogether who will pay off the original payment and issue a new loan to the new buyer. Note, however, that if you go with a new lender and your contract has a prepayment penalty, you may incur this penalty. Not to mention, if your outstanding loan balance is greater than the value of the car, then you’ll still have a loan balance leftover after the sale is complete. Also, there will likely be fees involved for the modification or refinance of the original loan, such as loan assumption fees, loan transfer fees, processing fees, and/or application fees.

3. Transfer and Hand Over All Relevant Documents to the New Owner: You will need to transfer all relevant paperwork to the new owner. Depending on your state laws, you can transfer the title of the car either at your local Department of Motor Vehicles or at a notary. Ensure that the lender has changed the lien holder on the car loan before leaving their office. Also, have your current inspection and emissions testing paperwork available.

One final thought. It’s possible that you are looking to transfer your car loan so that you and your credit report do not suffer the ill effects of a repossession. If this is the case, then please do not wait until the last minute to tell your potential buyer that you are behind on your loan payments and that the vehicle could be repossessed at any time unless the past due payments are made immediately. It’s only fair to clear this up beforehand so that the buyer won’t have any concerns about it.

The bottom line is, the answer to the question “Can I transfer my car loan?” is “Yes.” But it’s not going to work in every situation, and you’ll need to go through the process in order to make it happen, including the paperwork to place the vehicle into the new owners name and any paperwork to transfer the loan or finalize the repayment of your loan with the buyer’s new loan.

If you have any questions about how this works, feel free to ask us in the comments below.

Image Credit: Thomas Hawk

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  • O Dyy Odion

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  • Tiffany English

    Thanks so much for this information. My question is this! I got a car from a dealership who required me to put $1,000 down, but told me I can pay it at a later date. Also told me that the lender that financed me was gonna have my car payments due 45 days later. Once talking to the lender a week later I find out my payment is due in 2 1/2 weeks..so now I cant pay the 1,000 to the dealership because it caused a whirlwind with my other bills I set off to pay sooner because of how much time I had on my car payment. Now the bank owns my car, but I’m thinking I should return the car because I can’t satisfy the $1,000 to the dealership. I also found out that on my paperwork it says that my car is $23,916..and with the 1,000 down it would be 22,916.. and then the bank tells me I owe them the whole $23,916 because that’s what they paid the dealership for my car. So now I’m thinking I’m scammed for the $1,000 because I should only owe my bank 22,916

  • Darlene

    I’m buying a truck from my son and he owes tolls and I can’t get it registered. What can I do

  • Lexine Mendoza

    Just wanted to share something, if you are seeking for a Loan. Search Loansolutions PH in google they cater car loans.

  • Joey

    Can I go take a title loan out on my old tuck and use the money to buy a nother truck and just switch things over from the older truck to the new? Like tags and insurance? Or no cause there is a loan out on that truck.

  • rick

    I had a question, my income has changed in the last year and I need to lower the amount that I pay bi-weekly for my car. I contacted TD, they said it cannot be done,citing it will be complicated.Is there anyway to transfer the loan to another company and get lower monthly payments? or what can I tell TD to do assist with my situation.

  • Heidi Hart

    My situation is a little tricky my mother put my car loan in her name in order to get me a better interest rate but I have made all the payments including the down payment for the past 4 years and only have 1 year left to pay it off. Problem is her and I don’t get along and are no longer on speaking terms and while I don’t want to get into it I don’t want a relationship with her anymore for good reason, so of course want the loan taken out of her name and put into mine obviously, but she won’t give me any information on the loan (not even the balance) even though I’m still making the payments to her every month on time! What options do I have?! On top of that I’m having transmission problems and considering trading it in for another car at the dealer which I could do if the loan was in my name but can I do that if I tell them who the loan is thru (I know the bank it’s with and all that) or do I still need her consent? I’ve saved all my payment receipts to her plus I’m the insured driver if that helps.

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  • Shannon Lynch

    If a person, who is under a contract, for an FHA loan on a house, buys a car, during the final closing time, then transfers the car to his wife, to correct his error in judgement, how long until it shows up on his credit, so that he may continue the FHA loan and close on the house? (This is the seller of the house asking)

  • Big Momma

    So here’s my question hopefully someone can respond. I have a current car loan but I want to give the car to my parents and buy another car. Is this possible? How can I go about doing this?? And will that hurt my credit???

  • Shae

    I took over my friends car payments and we never changed it to my name now I have paid a year and a half and he wants me to change it to my name but my credit is not good so I can’t change it. He took the truck back I don’t know what to do. am I screwed did I just loose all that money?

    • Najee J. Bell

      No just build your score

  • Doug French

    I just bought a new car for my own business. It was a necessity for work and felt a bit pressured when I went into the dealer to get something. Especially after the sales person said, we will get you into a new car tonight, but you need to agree to purchase it before we start the whole financing process right now. I was not sure I would qualify for financing since it had been so long since I had bought a new car, but since I needed it for work I agreed (this before ever seeing the actual costs involved)..
    2 or 3 hours later after signing a bunch of paperwork, I took my car and went home, not really understanding all the costs in this purchase. With discounts the car ended up being about 20K. When I finally sat down and looked at the paperwork there was a number of things that jumped out at me.
    First was the pay off, if I wanted to pay the car off the next day, it would cost me about $33,000, or $13,000 more than I paid for it. If I took the $3,000 depreciation hit, buying this car cost me almost the entire price of the vehicle extra, by just driving it off the lot. I got 5 year financing at about 3% so in five years, if I make all the payments, the cost of the vehicle will be $38,000, or again, almost double what the actual cost and worth of the car that day I bought it. If either of these points had been made clear to me during the purchase I likely would not have bought it. The only advantage I can see in all this is hopefully being able to write all this off as a business expense.
    I also got over 6,000 dollars in warranties, things like and extended warranty, maintenance and service and a few I don’t understand. There is also a base charge of about $10,000 for miscellaneous stuff that is not explained. Plus 890 dollars to prep the car.
    The dealer I bought it from is about a 160 mile round trip and just driving out to the dealer to have them really explain this contract in depth requires a major effort. We are trying to get a time we can talk on the phone to clear up some of these things.
    Again the things that stand out is the payoff the minute you sign the contract being $13,000 more than I paid for it, and the final pay off being almost 18,000 more than the actual price (or almost double the original cost).
    Is there any free service I can use to have someone review and explain this contract besides the original dealer? They are telling me I can’t bring it to another dealer for this purpose. It is a 2016 Corolla by the way.
    I am also wondering for those of you in the know, does this 100% markup after purchase on a new car normal? I have not bought a new car for some time but don’t remember these kinds of costs associated with the purchase of a new car.

  • Well, if you can’t have it any longer, you actually have to look for another person who can accommodate the loan. Unless, if you don’t want the problem to be bigger.

  • Tracy Glass

    Loved the blog ” can I transfer a car loan”. Exactly what I was looking for. My daughter graduated college a month ago. We thought that she would be able to finance an auto loan with me as a co-signer. However, her credit score was in the 600’s. The dealer explained that she did not have bad credit, just not enough and that having her on the loan would give us a higher interest rate, causing her monthly payments to be more than we felt she would be able to handle. With that being said, I took out the loan by myself. She and I have agreed that after one year of auto payments from her checking account, she would attempt to obtain a loan from her credit union and pay off the existing loan or perhaps request that the credit union that the loan is with, allow the loan to be transferred or refinanced in her name.
    I thought showing both credit unions that she has been making the payments since the first payment would help. Does this make a difference? Or is it most likely that the loan institute is mostly concerned with her credit score?. Do you have any suggestions about how we could do something else to improve our chances of her taking over “her”/my car loan at the same or a lesser monthly rate? Any advice is helpful.