Not everyone has an assumable car loan, but if you do, it can be a solution when you can’t afford your payments.

Can I Transfer My Car Loan?

It may be possible to transfer your car loan to someone else. A loan takeover essentially means that someone else will take over the responsibility for your loan amount. In most cases, this will also mean that they’ll become the vehicle’s new owner. The new owner will complete the new loan paperwork and transfer ownership at the DMV.

Some lenders have assumable loans, which allow you to transfer your loan to another person. If your lender doesn’t have loan assumption written into your loan paperwork, you won’t be able to transfer your loan to another person.

Transferring a car loan also isn’t always possible unless you also transfer the ownership of the vehicle.

Why Would Someone Take over a Car Loan?

There are a few reasons why you may want someone to take over your car loan, including:

• You no longer need the car: If you no longer need your car, you may not want to make the payments any longer. If you move away to college or overseas, you may no longer have a need for your vehicle.
• You can no longer afford the payments: Perhaps the most common reason for wanting to transfer a car loan is that you can no longer afford it. Whether you lost your job or your income decreased, there are a few reasons why a car loan may become too expensive.
• You want to buy a new car: You may want to transfer your loan to another person if your car no longer meets your needs. For example, you may have a baby on the way and need a vehicle that’s larger than what you currently have.
• You’re at risk of repossession: Transferring your vehicle loan to another person can help you avoid repossession. A repossession on your record can lead to a bad credit score, which can make it difficult to qualify for other loans in the future.

A bad financial situation is the most common reason that someone may want to transfer an auto loan. An auto loan transfer can remove the financial liability of a car payment. If you still owe a significant amount on your loan term, transferring it to someone else can be a huge financial relief.

How to Take over a Car Loan

The process of transferring a car loan is different depending on your lender. Some lenders may allow you to transfer the loan, whereas others may not. Additionally, other lenders may charge you a fee for doing so.

The first step in an auto loan transfer is to reach out to the lender. It’s also a good idea to review the loan agreement to find out what it says about auto loan transfers. If your original lender allows you to transfer the loan to another person, that person will need to provide them with information. The new loan holder will have to fill out a new loan application and provide a copy of their credit score. They’ll also need a copy of their driver’s license and proof of insurance.

If your lender allows you to transfer your loan, you’ll also have to update the title. A car’s title shows ownership. The new borrower should be listed on the title as the owner. Once the loan transfer goes through, you’ll want to double-check the title shows the new owner.

Transferring your loan to another person isn’t usually an easy process. Even if you get loan approval from the lender, you’ll need to go through all the steps to ensure the original loan is paid off.

Things to Consider Before Transferring a Car Loan

There are a few important things to consider before transferring a car loan, including:

• Your lender may not allow it: Not all financial institutions allow loan transfers. Check with your lender and loan term agreement to find out your options.
• You may owe assumed interest: Depending on your existing loan agreement, you may owe assumed interest after paying off your car. Assumed interest means you pay the full cost of interest on the loan, regardless of when you pay it off. This means you could end up paying money in addition to the loan balance.
• It may affect your credit score: Transferring your car loan could have an impact on your credit score. Transferring a loan closes your account, which may affect your credit age. The good news is that while you may notice a temporary credit score drop, it’s often much less than if you were to miss your car payments.
• Your lender will have to approve the new borrower: You can’t just transfer your original contract to anyone. Most lenders will require the new borrower to complete a credit check and have enough money for a down payment.
• Don’t forget about insurance: Whether another person is assuming your loan or you sold the car to pay off the loan, you’ll need to update your car insurance policy. Make sure the new owner has sufficient insurance on the car. Contact your car insurance company because your insurance policy won’t typically transfer automatically.

Alternatives to Transferring a Car Loan

If you’re unable to get someone to take over your car loan, you may have other options available:

Refinance Your Auto Loan

Refinancing your car loan is a good option if you want to keep your car but can’t afford the monthly payments. Refinancing your auto loan means taking out a new loan with a different lender. If the new auto loan has a lower interest rate, it can bring down the cost of your car payments.

Ask your lender about refinancing options. Some lenders may allow you to refinance directly with them. You can compare lenders to find the best rates if they don’t. You’ll likely need good credit to qualify for a lower interest rate. If you have missed any payments, it’s unlikely that your interest rates will decrease.

You may also be able to refinance your car loan with a co-signer. This can reduce your monthly payments if the other borrower has a good credit score.

Refinancing may also be a way to transfer your car loan if your lender doesn’t allow it. Most lenders allow the original borrower to refinance. Refinance your vehicle first with a cosigner. Then, wait a few months, and refinance again, this time dropping yourself and leaving the one borrower as the only person on the loan.

Sell the Vehicle

The best and easiest way to transfer a car loan is to sell it. This option involves the buyer applying for and obtaining their own lending. Then, you’ll receive direct compensation from their lender for the agreed-upon amount.

The biggest difficulty with selling a vehicle is if your car is upside down. An upside-down auto loan means that you have negative equity or that you owe more on your vehicle than what it’s worth. In this case, if you try to sell your car, you may end up paying the difference yourself. Depending on how much negative equity you have, you may end up paying more money this route.

Ask a Friend or Family Member to Cover the Payments

You may be able to ask a friend or family member to cover your payments until you can afford them again. If you choose this route, make sure it’s a family member that you trust. Even if you trust them, creating a contract ahead of time can help to avoid any misunderstandings.

For example, you’ll want to determine if any loan payments they make on your behalf should be repaid. If they plan on driving your car while they make the loan payments, you may want to consider temporarily adding them to your insurance.

Decide who’s responsible for any fees that come up while making car loan payments, like parking tickets or tolls. It’s usually the owner who gets stuck with these bills. If your friend or family member enjoys driving your vehicle, you may also decide to sell it to them.

Ask to Pause or Defer Your Payments

If you’re going through a temporary financial difficulty, pausing or deferring your payments may be an option. Some lenders may allow you to change your payment date or skip a month altogether. Keep in mind this usually adds the payment to the back of the loan, which may mean that you will pay more in interest.

Voluntarily Give Your Car Back

If you can’t afford your payments anymore, you may be able to offer a voluntary repossession of your vehicle. This is an agreement with the lender that you’ll give up your car voluntarily. This will still lead to a repossession on your credit report, but the lender may take the sale of the vehicle off the amount you owe.

Trade In Your Car for Something More Affordable

If your monthly car payment isn’t affordable, you may trade in your car instead. Trading your car in for a cheaper car may make your monthly payments more affordable. If you have positive equity in your vehicle, you may be able to apply it to purchasing a cheaper vehicle, giving you even lower payments.

Some dealerships allow you to roll your original loan into a new one. However, this can be risky and may lead to higher car payments.

Take Out a Personal Loan to Pay Off Your Auto Loan

If you have a good credit score, you may be able to take out a personal loan to pay off your auto loan balance. However, this is only a good financial move if you can qualify for lower interest rates than what you were paying on your previous loan. In general, car loans typically have lower rates than personal loans unless you qualify for an introductory offer.

Transferring your car loan to another person may be an option. If it isn’t, you may have other options available to avoid a negative credit score.

Finance & Insurance Editor

Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.