How Do You Transfer Your Car Loan to Another Person?

Snapshot: While most vehicle loans aren’t transferable, vehicle loans may include an option for transferring the account to another person. You can read your loan paperwork or talk to your lender to find out if this is the case for your loan.

The average borrower with a loan for a new vehicle pays around $729 per month. That’s a pretty big monthly expense, so there are plenty of reasons why someone might want to transfer their car loan. Perhaps you can’t afford the loan anymore and a friend wants to take it over. Or maybe you’re getting divorced and your soon-to-be ex is willing to take on the financial responsibility for the vehicle. 

Before you can learn how to transfer a car loan to another person, though, you first need to understand whether it’s possible. 

Is It Possible for Someone to Take Over Your Car Loan Payments?

Most vehicle loans aren’t transferable. That means there isn’t a mechanism by which you can simply transfer the loan to someone else. 

Theoretically, you could pass the buck to someone else by letting them drive your car and making them promise to make the monthly loan payments. You could even ensure those payments are made by asking the other person to pay you directly. Once you get the payment each month, you can, in turn, make the car loan payment. 

This might sound like a tidy arrangement, but it can lead to a lot of issues. You still technically own the car, which means insurance and credit responsibilities are still on your shoulders. And if your friend decides they don’t want to pay the loan anymore or they wreck the car, you can be stuck picking up all the pieces.

In very rare cases, vehicle loans may include an option for transferring the account to another person. You can read your loan paperwork or talk to your lender to find out if this is the case for your loan. They can also provide instructions for how to transfer a car loan, which might include:

• The new borrower being approved by the bank. This will likely require running their credit so the lender knows they’re able to make the payments.
• The new borrower signing paperwork. They’ll need to agree to the loan terms.
• Updating titles and other paperwork. You may need to update information with the DMV and ensure the new borrower shows proof of insurance on the vehicle before you drop yours.

Other Ways to Get a Car Loan Out of Your Name

Most people won’t be able to transfer their car loan to someone else. However, that doesn’t mean you have to keep the car loan or that the vehicle can’t change ownership. Here are a few options to consider if you need to get a car loan off your personal finance books.

1. Sell Your Vehicle

If you can sell your car for the amount you owe or more, you can pay off the loan. Someone else can pay cash for your car or get their own loan to cover the cost of the car. This is actually the most common way that a car loan is “transferred” to another person.

2. Voluntary Repossession

If you know you’re not going to be able to make payments on your car and you don’t think you have a chance of selling it and paying off the loan, reach out to your lender. Let them know the situation and that you’d like to voluntarily surrender the car. This allows you to give up the vehicle without going through a series of late payments and having a repossession agent show up at a time that may be inconvenient or embarrassing. 

The lender will try to sell the vehicle to recoup what you owe. This does still show up on your credit report as a negative mark. If the lender can’t sell the vehicle for what you owe, you might also have to pay the difference.   

What If You Do Want to Keep the Car?

If you want to keep the car but are struggling to make your payments, you may have some options for relief. The first is to reach out to your lender as soon as you know you’re struggling to talk about options. Many lenders have programs to help individuals catch up on late payments. Your lender might also offer an option for skipping a payment and adding it on to the end of your loan. 

Another option is to refinance the loan. It could be that your loan terms simply make monthly payments more expensive than they have to be. If you have better credit than you did when you got the loan—or you have someone with good credit willing to cosign for you—you may be able to get a better interest rate or other terms. Some people save hundreds a month by refinancing loans.

The Bottom Line on Transferring a Car Loan to Someone Else

You generally can’t slide your auto loan booklet over to a friend and assume the matter is handled. However, if you can’t pay your monthly car payment, you may have some options. Research those options and speak to your lender as soon as possible to avoid further potential financial hardship. And you can learn more about car loans and even apply for one with the Credit.com marketplace of lenders.