How to Transfer an Auto Loan

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, - May 25, 2016

The transfer of an auto loan can be advantageous in some situations, but should be done with caution. It's a good idea to transfer a loan if you are selling your car but have not yet paid it off. If a loan is being transferred for the original debtor's benefit, however, the person who agrees to take responsibility for the loan should be certain they will not be taken advantage of. If you've decided you need to transfer your auto loan and have a person standing by to transfer it to, just follow these steps to transfer the car loan.

Step 1: Find a Transfer Partner

Transferring an auto loan is a big deal, as it lays responsibility on somebody who may never have had an interest in owning the car. If a loan transfer is done on behalf of the original debtor, one should only agree to take the loan if they are a spouse or very close family member – not a boyfriend or girlfriend, fiancee, or friend.

Step 2: Apply for a Refinance Loan

Loan transfers are done by having the recipient of the transfer refinance the vehicle and sign their name to the new loan. The credit of the recipient is mainly what influences the rates of the loans available.

This might not be of importance to you, since you won't be responsible for paying the new interest rate, but your transfer partner should still have good credit if possible. This is especially true for both of your sakes if you plan on refinancing once more and buying the car back at a later date.

Step 3: Modify the Title

After the refinance loan is signed by your transfer partner, the loan has successfully been transferred to a different name. The next step is to modify the title of the car to reflect its new owner, unless some deal was worked out beforehand where the original loan holder retains ownership.

To modify the title of a car, both you and your transfer partner need to visit your local DMV with valid IDs in hand. You will also need to write up a bill of sale.

Step 4: Get Car Insurance

If the new owner of the vehicle plans on driving the car at all, he or she needs car insurance. You need to contact your current insurance company and cancel your policy, then have the new owner apply for insurance since the car is now under their name. Make sure you are added to the policy as a driver if you still intend to drive the car.

The Bottom Line

These four steps allow you to transfer the ownership of a vehicle to another person, making them responsible for the current loan outstanding and car insurance. Although the process itself is easy, transferring a car loan should be taken very seriously.

On the other hand, if you're here because you need an auto loan, CarsDirect wants to help. We can match you to a local dealership that knows how to handle unique credit situations. Get started by filling out our free and secure car loan request form today.


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