Buying a car with the help of an auto loan is common, but circumstances change. You may find yourself needing to transfer your car loan to someone else—whether due to financial constraints, upgrading to a new vehicle, or simply not needing the car anymore. But is it possible to transfer a car loan to another person? The answer depends on your lender and the terms of your loan agreement.
In this guide, we’ll walk you through the process of transferring a car loan, the key factors to consider, and potential alternatives if a direct transfer isn’t possible.
Can You Transfer a Car Loan to Another Person?
In most cases, car loans are not directly transferable. Lenders approve loans based on your credit history, income, and financial stability, meaning they may not automatically allow someone else to take over your loan. However, some lenders do allow loan assumptions, meaning a new borrower can take over the existing loan under certain conditions.
If your lender does not permit direct loan transfers, you can consider refinancing or selling the car to a buyer who qualifies for their own loan. Let’s explore your options in detail.
Step-by-Step Process to Transfer a Car Loan
Step 1: Check Your Loan Agreement
The first step is reviewing your loan agreement to determine if the lender allows loan transfers or assumptions. You can check your loan documents or contact your lender directly. Look for clauses related to:
- Loan assumption policies
- Prepayment penalties
- Transfer restrictions
If your lender does not allow loan transfers, you may need to explore other alternatives, such as refinancing or selling the car.
Step 2: Find a Qualified Buyer
If your lender allows a transfer, the next step is finding someone who qualifies for the loan. The new borrower must meet the lender’s credit score, income, and debt-to-income ratio requirements.
Consider the following when choosing a potential buyer:
✅ They have a good credit score (usually above 650)
✅ They have a stable income to afford the monthly payments
✅ Their debt-to-income ratio meets lender requirements
You may find a buyer among friends, family members, or someone looking for a second-hand car with financing.
Step 3: Get Lender Approval
Once you find a qualified buyer, the new borrower must apply for loan assumption with the lender. They will need to submit financial documents, such as:
- Proof of income (pay stubs, tax returns)
- Credit history (credit report and score)
- Employment verification
- Debt obligations
The lender will assess whether the new borrower meets their lending criteria. If approved, the loan will be transferred to the new owner.
Step 4: Transfer Car Ownership
If the loan transfer is approved, you also need to update the car title and registration. This process varies by state or country but typically involves:
- Visiting the DMV (Department of Motor Vehicles)
- Submitting the title transfer paperwork
- Paying any necessary fees
- Updating insurance policies
The car must be legally registered under the new borrower’s name to complete the process.
Step 5: Update Insurance Policy
Once the loan and title transfer are complete, the new owner must update the car’s insurance policy. Many lenders require borrowers to have comprehensive insurance to protect their investment.
Ensure that:
✅ The new borrower has an active insurance policy
✅ The policy meets the lender’s coverage requirements
✅ Your name is removed from the previous policy (to avoid liability)
After this step, the new borrower officially takes full responsibility for the car and loan.
Challenges in Transferring a Car Loan
While the process may seem straightforward, there are potential challenges:
❌ Lender restrictions – Many lenders do not allow loan transfers.
❌ New borrower rejection – If the new applicant has a low credit score or unstable income, they may not qualify.
❌ Negative equity – If the car’s value is lower than the remaining loan amount, the buyer may be reluctant to assume the loan.
❌ Additional fees – Some lenders charge processing fees for loan transfers.
If a direct loan transfer isn’t possible, consider alternative solutions.
Alternative Options If a Loan Transfer Is Not Allowed
If your lender doesn’t permit loan transfers, you still have other options to get out of your car loan.
1. Sell the Car and Pay Off the Loan
One of the easiest alternatives is to sell the car, use the proceeds to pay off the loan, and close the account.
How to do this:
- Find a private buyer or trade the car in at a dealership.
- Ensure the selling price covers the remaining loan balance.
- Use the funds to pay off the lender.
If the sale price is lower than the remaining loan amount, you may have to pay the difference out of pocket.
2. Have the New Buyer Refinance the Loan
If the new borrower cannot take over your existing loan, they can apply for a new loan in their name and use the funds to pay off your existing loan.
How this works:
- The new buyer applies for a car loan with a bank or credit union.
- If approved, they receive the funds and pay off your loan.
- The title is transferred to the new owner.
This option ensures a clean financial break and allows the buyer to get a loan with terms suited to their credit profile.
3. Lease Transfer (If Applicable)
If you have a leased car, you may be able to transfer the lease to another person. Some leasing companies allow lease takeovers through third-party platforms like Swapalease or LeaseTrader.
How to do this:
- Contact your leasing company to check transfer policies.
- Find a qualified buyer to take over the lease.
- Complete the transfer paperwork and pay any applicable fees.
Lease transfers are a good option for those who don’t want to continue making payments but don’t own the car outright.
Tips to Successfully Transfer a Car Loan
✔ Communicate with your lender – Always check their policies before proceeding.
✔ Choose a financially stable buyer – Ensure they qualify for the loan.
✔ Check for hidden fees – Some lenders charge transfer fees, which you should be aware of.
✔ Clear outstanding payments – Ensure your loan is up to date before transferring.
✔ Keep records of all transactions – Have written agreements to protect both parties.
Final Thoughts
Transferring a car loan to another person can be complex, as many lenders do not allow direct transfers. However, with careful planning, you can explore loan assumption, refinancing, or selling the car as alternative solutions.
Before proceeding, always check with your lender, find a financially responsible buyer, and ensure all legal and financial paperwork is properly completed.
If a direct transfer isn’t possible, refinancing or selling the car may be your best option. Whatever route you choose, taking the right steps can help you transition smoothly and avoid financial burdens.
