How to Transfer a Car Loan to Another Person

By Upstart Content Team | Updated June 30, 2022
reading time 5 min read
Woman drives her car with her dog in the passenger seat while considering a car loan transfer

Key takeaways:

  • If you’re struggling financially or you don’t want your car, you may want to consider transferring your car loan to another person.
  • Your car loan may be transferable depending on your lender and the terms of the loan.
  • Keep in mind, transferring a car loan may temporarily lower your credit score.

Are you stuck with a loan for a car that you no longer need or want? You may be happy to learn that some lenders allow borrowers to transfer a car loan to another person. Once a car loan transfer is complete, the new owner takes over the car and the remaining loan payments. 

This may sound like a simple process, but it’s not always the case. In fact, transferring a car loan to another person can be a difficult process for the original borrower, the new borrower, and the loan lender. 

However, it’s possible to move an auto loan from one borrower to another, and there are several reasons why borrowers go through this process.

Why you may want to transfer a car loan to someone else

Whether it’s an unexpected situation or a financial setback, a car loan can quickly become a big financial burden. Here are a few reasons why you may want or need to transfer your car loan to another person:

  • You’re struggling financially and need to get rid of a monthly payment.
  • You don’t use your car much and you want to sell it.
  • You want to trade in your car for another. 

Can you transfer a car loan to someone else?

Whether or not you can transfer a car loan to someone else depends on whether you have an assumable loan. An assumable loan is a loan that’s able to be transferred. Your ability to transfer your car loan to another person also depends on your lender and the person assuming responsibility. 

First, you need to check the loan agreement to see if it’s possible. Then you need to contact your lender so you can learn about the process. 

Additionally, you need to confirm that the person taking over the loan meets the lender’s criteria. For example, they may need to have a decent credit score to show the lender they can handle the payments.

Does transferring a car loan affect credit score?

Transferring a car loan to another person can temporarily lower your credit score, even if you haven’t missed any monthly payments. When you transfer a loan, you close a credit account, which can lower the average age of your accounts.

The age of your accounts is a factor that helps determine your credit score, so closing one that you’ve had for a while may lower your score. The older the credit account is, the more of an impact it’ll have on your score. 

How to transfer a car loan to another person

The exact process you go through to transfer your car loan to another person will depend on the lender you have. Generally, here’s what you can expect:

  1. Contact your car loan lender: Before you do anything, you need to contact your auto loan lender to find out if your loan is assumable. If not, you’ll need to get their permission to transfer to the loan. To do so, you’ll need to explain why you require a car loan transfer.

    Before your lender agrees, they may ask you to prove that you can’t afford to make the payments. Additionally, you may need proof the new borrower can take over the car payments. The lender will need to verify the credentials of the new borrower just as they would before they approve anyone for a new loan.

  1. Check your auto loan contract: Even if your lender allows you to transfer the auto loan and title to another person, you need to check your auto loan contract. This document will help you understand crucial details about your auto loan, including:
    • How much you still owe for the loan
    • Who the debt should be paid to
    • Whether there are any fees associated with transferring your loan
    • If there are any terms or restrictions you should be aware of before transferring the loan

      Also, have the new borrower review the contract so they know what to expect. Keep in mind, once the transfer is complete, the new borrower may have a contract that differs from the original. The lender may adjust the terms to better fit the borrower’s credit status and income.

  1. File the new loan paperwork: Next, the new borrower needs to complete an auto loan application from the lender. If you’re approved, and you’re working with the same lender, the loan contract will likely be similar to the original. 
  2. Change the car title: Once the new borrower is approved for the car loan, they need to transfer the car title from the original car owner to the new one. To complete the transfer, lenders typically require a copy of the new car title.

    The original and new car owner can get a title transfer from their local Department of Motor Vehicles (DMV). Each individual must provide:

    • Proof of identity, like a driver’s license or passport
    • Bill of sale 
    • Proof of active auto insurance

Alternatives to a car loan transfer

If your car loan isn’t transferrable or you don’t want to go through the process, you do have other options that can help you save money on your car.

Refinance your car loan

To alleviate some financial burden, consider refinancing your auto loan. When you refinance your loan, you replace your current auto loan with a new loan. The new loan pays off your current loan and comes with a new interest rate, loan agreement, and a new repayment term. If you qualify for a loan with favorable terms, you may be able to:

  • Save money on interest if you get a lower interest rate
  • Get a longer loan term and reduce the size of your monthly payments

Get a co-signer

If you’re struggling financially, think about asking someone you trust to co-sign your loan. If your lender will allow it, the co-signer will be responsible for making the monthly loan payments. Keep in mind, the co-signer will need to have a decent credit score to qualify. 

Ask for a deferment

Some lenders will grant borrowers a loan deferment or a temporary break from making payments if they’re struggling to pay. A loan deferment may last for several months. Any payments you skip are added to the end of your loan term. 

This method may provide temporary relief from monthly payments, but the interest will still add up, and you may be charged a deferment fee depending on the lender you have.

Sell your car

Selling your car may be the quickest and simplest solution compared to a car loan transfer. With this option, the buyer applies for their own car loan. If they qualify, they pay you a portion of the funds to pay off your lender. Once you pay off your loan, the lender will release your title, which you will transfer to the buyer.

Now, put the pedal to the metal

If you’re set on a car loan transfer, start by contacting your lender to find out if your loan is assumable and what next steps you need to take. Along each step of the process, keep the lender and the new borrower in the loop so you’re all on the same page. If your loan isn’t transferrable, consider other options like an auto loan refinance or a loan deferment. 

Car refinance loans not available in IA, MD, NV, or WV.

This content is general in nature and is provided for informational purposes only. Upstart is not a financial advisor and does not offer financial planning services. This content may contain references to products and services offered through Upstart’s credit marketplace.

About the Author

Upstart Content Team

The Upstart Content Team shares industry insights, practical tips, and borrower success stories to help people better understand the important “money moments” of their lives.

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