Most people find it difficult to purchase a vehicle outright. So, borrowing money to buy a new or used car is common. But what happens if you can’t make your monthly payments? What options do you have if you simply do not need your car? Perhaps you want to gift it or sell the car to a family member — even if the car still has an outstanding loan. Read on to find out how to transfer a car loan to a family member.
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Can you transfer your car loan to another person?
If you are thinking of transferring your loan to a family member, read through the terms and conditions of your loan. You may find that your auto loan is assumable, which means you can transfer your obligation to another person.
Speak with your lender if you don’t understand your loan terms or can’t find your documents. Your lender can explain how to transfer a car loan to another person.
Reasons to transfer a car loan to a family member
Sometimes, changes in life make it challenging to own a car. Common reasons to transfer your car loan to someone else include:
You may not need a car if you move. Suppose you relocate to a city with greater access to public transportation. In that case, having a vehicle to commute to work or run errands may not be necessary. Or you may move to a neighborhood where everything is within walking distance.
You can’t afford the car payment
If you struggle to make ends meet, staying current on your monthly car payments may be tough. And your credit score could be impacted if you fall behind.
An auto loan transfer to a family member removes your financial burden. Plus, you can keep from defaulting on debt when you transfer your loan to another person.
You want to purchase a cheaper car
When your car is pricier than you can afford, you may want to swap it for a less expensive vehicle. But if you owe more on your car than it is worth, you could be stuck paying that difference when trading it in.
But if someone else can take over what you owe, you may be able to find a more affordable vehicle that better meets your needs.
You want to give a gift
When you have a family member who needs a vehicle, you may consider giving them your vehicle. Gifting the car may be a good deal for them if you have paid down a substantial amount of what is owed, as they won’t have as much to pay off.
How to transfer a car loan to another person
Transferring a car loan can be tricky. The following steps can help you transfer a car loan to another person.
Step 1: Discuss with your lender
You should speak with your lender to find out whether you have an assumable car loan. It’s also a good idea to find out what steps you need to take with your lender to transfer the car loan. Some lenders charge a fee to transfer an auto loan.
In the event that your agreement isn’t assumable, you can talk with the lender to see whether it would grant permission to transfer your loan.
Step 2: Have the new person apply for the loan
The new borrower should examine your current loan agreement. Because the new borrower assumes responsibility for your loan, they need to understand its terms and conditions. Even though the lender may update the contract to add the new borrower’s information, the terms and conditions should be relatively similar.
When the new borrower is comfortable with the terms, they should complete a loan application for the lender.
Step 3: Get approval
When the lender approves the application, you can transfer your car loan. The new buyer will be asked to sign a new set of loan documents. However, some lenders ask the new buyer to sign the old loan.
Step 4: Transfer the title
Once the car loan is approved, you should visit the Department of Motor Vehicles (DMV) to transfer the title. You should do this as quickly as possible to avoid any future liability for the vehicle.
To transfer the title, it will be necessary for you and the buyer to present your driver’s license or valid identification. You should also bring the bill of sale, registration documents, and money to process the transfer.
Step 5: Contact car insurance
When you transfer a car loan to a family member, it is a good idea to speak with your car insurance company to find out what they require to make the switch. Or does the new buyer need to apply for a new insurance policy.
The insurance company may ask for you for proof, such as a bill of sale, to show that you no longer own the vehicle. Once the title is transferred, moving the policy to the new driver is essential. After all, you want to avoid making insurance payments on a car you no longer own.
Let someone else take over your car loan
Sometimes, life changes affect your ability to keep your car. If you lost your job or took a pay cut, you could damage your credit if you fall behind in your payments. Or you may no longer need the car you bought. You both win if you can transfer your car loan to a family member. Not only does your family member get a vehicle, but you are relieved of your debt.
Can an existing car loan be transferred to another person?
If your car loan is assumable, you may be able to transfer it to another person.
Can you sell your car with a loan on it?
Even if you still owe money on your car, you can sell it. Contact your lender for the payoff amount and instructions on how to repay what you owe.
How do you get rid of a financed car?
You can get rid of a financed car by selling it or trading it in. If you have an assumable loan, you can transfer your car loan to someone else.