High car loan payments troubling you? If you’re thinking of refinancing your car loan to someone else to free yourself of the burden, read this!
If you’re a distressed car owner troubled by the rising gas prices, high car loan monthly payments, and the overall increase in prices (including new and used vehicles) – you must be itching to save money! You’re not the only one frantically looking to transfer your auto loan to someone else. Hundreds of Americans are scrambling to switch to a used car or have someone else take on their loan.
However, is there such a thing as “transferring a car loan”? Read on to find out more and whether there are any alternatives to it.
Is It Possible To Transfer a Car Loan?
No, it is not possible to directly ‘transfer’ a car loan to another person. When you take on an auto loan, you sign an agreement that you will eventually become the owner of the vehicle. Until then, it is your personal responsibility to pay off the loan amount used to purchase the vehicle. Therefore, you cannot transfer this responsibility to someone else.
However, there might be other ways to reduce the burden of paying high auto loan payments – like refinancing it or selling the car off to a third party. These options will let you close your loan prematurely and avoid the high costs of continued monthly payments.
Why Would You Want to ‘Transfer’ a Car Loan?
Those looking to sign a loan over to someone else typically do so because they are stuck in a bad loan. A bad auto loan could have a high APR, high monthly payments, strict terms and conditions, and more that could hamper your ability to pay the lender in time. You may have heard about people ‘transferring’ their loan to someone else, but in reality, there is no such thing – it’s a misnomer.
What’s the Best Way to Transfer a Car Loan?
You can choose two ways to get yourself out of a bad car loan:
- Selling your car off to a third party changes the ownership of the vehicle, and it will be the new owner’s responsibility to pay the car loan monthly amounts. The new buyer has to apply for an auto loan independently, get approved, get funding, and then buy the car from you.
- Refinancing the car to include a cosigner will help you share the responsibility with a new person.
How To Refinance a Car Loan Into Someone Else’s Name
Auto loan refinancing can help you remove yourself from a car loan and sign the loan over to someone else. However, you won’t be able to do it in one single step, and will take time to process. Here’s what you should do:
1. Refinance the current auto loan to add a new person as a co-signer
Apply for refinancing with multiple lenders using a finance platform like Way.com. You’ll get to compare offers and choose one that allows co-signers. The approval is mostly done based on both your credit scores. If you qualify, the vehicle title will be updated to include your co-signer as well. The co-signer has full responsibility to pay back the loan along with you (the primary borrower).
2. Refinance the loan a second time to keep the co-signer and remove yourself from the loan
The next step is removing yourself from the vehicle title, which means you need to refinance once again. It is recommended that you don’t refinance immediately and wait at least a few months before applying. However, there is no guarantee that your chosen lender will approve it.
How to Get Out of a Bad Car Loan without Transferring It to Someone Else
Ask your lender to defer your monthly payments
Deferring a car loan payment involves asking your lender to let you lower the upcoming payment, pay only the interest portion of it, or skip it entirely. You can either defer the payment for a month or even more, depending upon the severity of your financial situation. However, you must resume payments after the relief period.
Renegotiate with Your Dealer
You could ask your lender to give your a temporary forbearance which will pause your payments for a short period. However, this option may not work if the lender has sold your loan to a financial institution.
Choose auto loan refinancing
Auto refinancing on your own can help you score a lower APR, lower monthly payments, and better terms and conditions.
Trade in Your Car for a Cheaper One
The advantage of this is that you can pay off at least a part of the car loan that’s causing you financial stress, while still having a vehicle with cheaper costs.
Consider Getting Rid of Your Car/Selling It to Another Party
If both trading in and refinancing do not seem feasible, you can also pay off the loan by selling off the car. The advantage of selling off the car is that you can pay off a large amount of the loan quickly.
Voluntary Repossession
The last resort is to voluntarily turn in the car and ask the lender to clear the loan. Doing this might hurt your credit score – but it’ll save your from the disaster of future default.
Frequently Asked Questions (FAQ)
Can Someone Take Over My Car Loan?
You cannot let someone ‘take over’ your car loan directly. You can either borrow money from them (parents, trusted friends, spouses) and pay off the loan, or refinance to add them as a co-signer. That means they will have a joint responsibility to pay off the loan with you.
Can I Refinance A Car With The Same Lender?
Yes, you can refinance a car loan with the same lender as long as they don’t have any explicit clauses against it. However, you should also try applying to other mainstream lenders, shop around, and compare several rates before making a decision.
Does Refinancing a Car Loan Affect Credit Score?
When you first apply for refinancing a car loan, it will temporarily affect your credit score by a few points. However, you will be able to improve it to even higher as long as you are consistent in your payments.
How Do I Transfer a Loan from One Person to Another?
While you can’t directly transfer a loan from one person to another, you can always refinance to bring them on as a co-signer. After that, you can refinance once again to put the loan exclusively in the co-signer’s name.
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