In addition to helping a car owner get out of an auto loan without ruining their credit, transfering a car loan can help an individual who wants a used vehicle to purchase one without going to a dealership. Transferring a car loan is an easy way for two individuals to save time and money.
Review all loan documents for the original purchase of the vehicle to make sure that transferring the loan to another individual is allowed. Many lenders will allow a qualified buyer to assume a loan payment, but there are some who do not allow car loans to be transferred. If you have looked through your original car loan documents and cannot find what you are looking for, contact the lender directly.
Start looking for potential buyers. Many individuals interested in buying a used car will jump at the chance to have a car loan transferred to their name. In most cases, transferring a car loan will mean that the new owner will not have to pay a down payment. However, if the car loan payment is behind and money will be needed in order to catch up on past due payments, be sure potential buyers are aware of this. Do not wait until the last minute to tell a potential buyer that the vehicle they are interested in having transferred to their name might be repossessed if past due payments are not made immediately.
Obtain a loan transfer package (sometimes called a loan assumption package) from the lender. This package will include everything that is needed by the lender to have the car loan transferred out of the original owner's name and into the name of the new buyer. In addition to an application, the package will request information needed for income verification and ask for references. Encourage the potential buyer to check her credit prior to completing this package since she will need to meet certain credit requirements to qualify for the car loan transfer.
Prepare to pay any necessary fees. Even after finding a qualified buyer to take over the remaining balance of the car loan, some lenders will still require payment of some fees, such as loan assumption fees, loan transfer fees, processing fees, or even application fees. The buyer may be willing to pay some or all of these fees if they are still cheaper than a traditional down payment, but the original owner should be prepared to pay all of the fees himself.
- Cars.com: Selling Your Car if You Owe Money on It
- Loan.com: Can I Transfer My Car Loan to Another Person?
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Tameka McSpadden is a freelance writer with several years of professional experience. With both a Bachelor of Science in health care management and an associate degree in business administration from Bellevue University, McSpadden enjoys writing about all medical topics. She is currently preparing for a literary agency internship in North Georgia while attending various writing workshops.