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 it happen.
Your Agreement
Your car loan contract should clearly spell out whether a loan can be transferred or assumed by a new party. Begin by examining your contract to determine whether this is possible.
If 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 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 Vehicles (DMV) 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 — such as it is damaged or stolen — you will be held responsible.
See Also – How to Save Money With a Lease Buyout
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