Can Somebody Take Over My Car Loan?

Can You Transfer Your Car Loan to Someone Else?

Whether or not you can transfer your car loan depends on your lender. Some allow loan transfers, and others don't. Even if your lender permits transfers, it's not as simple as having someone else make your monthly payments for you.

Transferring a car loan can be complicated and typically requires the new borrower to apply for a separate loan with no guarantee that they will qualify—or that they'll get the same contract terms you did as the original borrower.

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How to Transfer Your Car Loan to Another Person

The process for transferring a car loan varies by lender. However, here's a list of steps you can generally expect to take.

1. Check Your Loan Contract

The first thing you should do is read your loan contract. It will tell you whether transferring the loan to another person is an option under your current agreement. If it is, it should provide details about what you need to do, including whom you should send the payoff to and whether you will be charged fees for transferring the loan. If it isn't, you'll need to find another way to offload your loan payments.

2. Contact Your Lender

If your loan agreement permits a transfer, the next thing you should do is contact your lender to explain the situation; they can help guide you through the process.

3. Fill Out the New Loan Paperwork

Lenders typically require the new borrower to apply for a new loan. This generally includes completing a loan application and providing documentation that shows they have adequate income and room in their budget to make the payments each month.

The lender will review the application and pull the potential new borrower's credit reports to decide whether to extend a loan offer, including what the new loan term, interest rate and monthly payment will be.

4. Transfer the Car Title

If the new borrower qualifies for a loan, the original owner needs to sign over the title to the new owner. The new borrower also needs to purchase at least the minimum amount of car insurance their state requires.

To complete the transfer, both parties may need to head to the department of motor vehicles (DMV) with the title, valid IDs and bill of sale. The process and required documentation varies by state, so it's best to check with the DMV where you live to ensure you complete all of the necessary steps.

When Should You Transfer Your Car Loan?

In some situations, letting someone else take over your car loan may be in your best interest.

• You can't afford your payments. If you've hit a financial road bump and your payments are no longer manageable, having someone take over your car loan can help prevent you from defaulting and having the lender repossess your vehicle—both of which can negatively affect your credit.
• You no longer need the car. When your driving habits change and other forms of transportation, such as public transit, rideshares or car share services can meet your needs, it may not make sense to keep your vehicle.
• You want to buy a cheaper car. Have you realized your current payments are stretching your budget too thin but you still need a vehicle? Transferring your loan to someone else may be a good option in this situation. It can free you up to get a more affordable car with lower monthly payments that better fit your budget.
• You have a family member who wants to take over. Transferring your loan to a family member can be a win-win if you're experiencing financial hardship. It helps them get a set of wheels and eliminates your loan payment.

What to Consider Before Transferring Your Car Loan

Transferring a car loan can be a difficult process and not all lenders allow it. If your lender does, here are several things to keep in mind before proceeding.

• Lender policies: The process for transferring a car loan varies by lender. If your lender allows it, you must follow each step carefully.
• New borrower's eligibility: The new borrower can't just start making the payments on your existing loan. They must qualify for a new loan. That means the lender will check their credit, review their income and evaluate their debt-to-income ratio before making a lending decision.
• Title transfer requirements: The process for transferring a car title from the original owner to the new borrower varies by state but usually starts with the original owner signing the title over to the new borrower. After that, both parties may need to submit the title, an application and bill of sale (with the new and old borrowers' signatures) to the DMV. Your state may have additional requirements.
• Potential credit impact: Transferring your loan to another person may impact your credit scores since closing the loan could affect the mix of open credit accounts in your profile. However, closing an account you can't afford is probably better than missing payments.

Alternatives to Transferring Your Car Loan

If transferring your loan isn't possible, here are a few alternatives to consider.

• Refinance your car loan. Refinancing your loan may help you snag a lower rate if you have good credit. You may also be able to add an eligible cosigner who agrees to make the loan payments if you can't. Keep in mind, though, that missing payments could affect both parties' credit.
• Sell the car. If your car is worth as much as or more than what you owe, selling it could give you the funds you need to pay off your loan balance.
• Trade it in for a more affordable model. If your vehicle has a decent trade-in value, trading it in for a less expensive car may help lower your monthly payments.
• Choose a voluntary surrender. If you're facing defaulting on your loan and vehicle repossession, you could choose to return your car to the lender. This is known as a voluntary surrender or voluntary repossession, and it gives you some control over the process so you're not blindsided by a lender repo. The lender will often sell the car and use the proceeds to pay off your loan balance. If the car sells for less than you owe, you're responsible for paying the difference.

The Bottom Line

If your lender allows it, transferring your car loan to someone else can provide financial relief when your payments are unmanageable. If not, consider other options, such as selling your vehicle, refinancing your loan, trading in your car for a cheaper model or voluntarily returning your car to the lender before they have a chance to repossess it.

Many lenders also offer financial hardship programs that provide relief to borrowers experiencing financial difficulties. These programs aren't available to everyone, and you typically need to qualify. But they may be worth exploring if you're unable to make your payments. If you're planning to apply for financial hardship assistance, it's best to contact your lender before you miss a payment, if possible.