There are several ways to transfer a car loan to another person for whatever reason, like if someone else wants to pay the loan, you can no longer afford repayments, you want to switch lenders or you want to sell your car. Keep reading to find out how to transfer a car loan in Canada, and learn when you might want to find alternatives to a car finance takeover.
Can you transfer a car loan to another person in Canada?
Yes, most lenders in Canada will be willing to work with you to transfer a car loan to another person. Whoever takes over your loan will have to meet the lender’s requirements – like having a minimum credit score and income – in order to be approved for the car finance takeover.
Also, depending on your original loan contract, you may have limited options or be charged an early repayment fee when you close out your loan.
How to transfer a car loan to another person in 7 steps
You can transfer a car loan to anyone who is willing to take over your payments by following these steps:
Contact your dealer or lender.Contact your lender to find out if you’re allowed to transfer your car loan to another person, and what this car finance takeover looks like. You can ask about loan transfer options like transferring your car loan to someone else’s name, switching lenders or selling your car. They can give you an idea of what paperwork you have to fill out for each option.
Check restrictions on a car loan takeover.Ask your lender about restrictions to transfer a car loan to another person. You may have issues transferring your loan if you’ve missed payments, or if the person you want to transfer to has bad credit or doesn’t meet other eligibility requirements.
Put together the necessary documents.You’ll want to fill out your end of the paperwork in advance so that you can guide your buyer through the loan transfer process. The new buyer will likely need to visit your lender in person so that your lender can witness signatures and set up direct deposit.
Line up your buyer.Line up a buyer to complete the car loan takeover. Most vehicle transfers happen between friends or family members, but you can also advertise your vehicle on a public marketplaces in Canada like Kijiji or Facebook Marketplace to find the right candidate.
Set up meetings with potential buyers.Once you’ve got an interested buyer, you should show them the vehicle and explain the process for how to transfer the car loan. You’ll also want to check that they have a good credit score and proof of income to show that they can make the payments.
Confirm the loan transfer.Go into your lender or dealership with your prospective buyer to complete the car finance takeover. Be sure to double check that your loan has transferred successfully before you allow the new buyer to drive away. This will make sure you’re not held liable for payments or damage to the car in the future.
Update the vehicle’s title registration.When you transfer a car loan to another person, you should also make sure to transfer the ownership of the vehicle. You can do this by going into your local insurance agency to get the car registered and insured under the new owner’s name.
Who is most likely to be researching how to transfer a car loan to another person?
Finder data suggests that men aged 25-34 are most likely to be researching this topic.
Response
Male (%)
Female (%)
65+
1.98%
1.61%
55-64
4.69%
2.71%
45-54
9.32%
4.58%
35-44
14.68%
7.03%
25-34
21.45%
11.19%
18-24
14.21%
6.56%
Source: Finder sample of 1,921 visitors using demographics data from Google Analytics
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Common ways to transfer a car loan to another person
Here we’ve outlined a few common ways to transfer your car loan to another person in Canada.
Switch lenders. One common way to transfer a car loan to another person is by simply switching lenders. A new car loan will be issued by the new lender under the other person’s name. Both the old and new lenders might even be able to communicate directly with each other to close out your loan.
Transfer to another person with the same lender. If someone else wants to finish paying off your car, you can ask your current lender about switching your car loan into that other person’s name. Keep in mind that your lender will require the other person to meet basic eligibility requirements, like a minimum credit score and income, in order to approve them taking over the loan.
Sell your car. If you decide to sell your car, you may be able to transfer your car loan to the person buying your car. In that case, the process would be similar to the first two points above. Otherwise, you can use the money from the sale to pay off your car loan yourself, which eliminates the hassle of having to transfer it to another person. Realize that you may still end up owing money on your loan if you can’t sell your car for the full amount.
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Benefits of transferring a car loan to another person
There are a handful of benefits when you transfer a car loan to another person:
No more payments. This is the biggest benefit since the reason why most people transfer a car loan to another person in the first place is to get rid of their payments.
Less impact on your credit score. If you find someone to take over your loan, you won’t need to worry about defaulting on your payments and ruining your credit score.
You can purchase a new vehicle. Once you get rid of your old loan, you’ll be better placed to purchase a less expensive vehicle.
Save money. Once you transfer a car loan to another person, you can choose to go without a vehicle to save money on all of the costs of car ownership.
What to watch out for with a car loan takeover
Transferring a car loan to another person comes with its fair share of drawbacks as well. These include the following:
Difficult to find qualified buyers. It can be difficult to find a buyer with a solid credit score who’s willing to complete a car finance takeover.
Restrictions on certain transfers. Your lender can refuse to transfer a car loan – which means you’ll need to explore other options to get rid of your loan.
You’ll lose any positive equity in the vehicle. You’ll lose any money you put into your loan if you transfer it several years into your payments.
Transfer fees. You’ll likely need to pay a fee to transfer a car loan to another person in order to cover administrative costs for your lender.
It can be tough to convince a buyer that a financed vehicle will be theirs free and clear if they choose to buy it. Here’s what you should know beforehand to help make the sale a success.
Alternatives to transferring a car loan to another person
You may want to consider these options if you don’t want to transfer a car loan:
Refinance your car loan. If you’re struggling to make your payments and your credit score is in good shape, you might like to consider refinancing your car loan. This would allow you to spread your payments out over a longer term and potentially even qualify for better interest rates.
Sell the vehicle to pay off your loan. If you have a decent amount of positive equity accrued in your vehicle, you may be able to sell it to pay off your loan. This would let you pay off your loan and put whatever money is left over from the sale into savings. Find out how to sell a car with a loan on it.
Trade in your car for a more affordable one. Another safe bet would be to trade your vehicle in for something more affordable. Let’s say your vehicle is worth $20,000 with $5,000 left on it. If you trade it in for a $10,000 vehicle, the dealership may be willing to wipe out your debt.
What is positive vs negative equity?
Be aware that you could lose money when you transfer a car loan to another person by selling your car if you have positive equity in your vehicle. On the other hand, you’ll save money or break even if you have negative equity in your vehicle.
Positive equity. Having positive equity means that your car is worth more than what you owe. For example, if your car is worth $10,000 and you owe $3,000, you have a positive equity of $7,000. If you have positive equity in your vehicle, you may want to refinance your loan to lower your payments or sell your car to pay off your loan (and pocket whatever money is left over).
Negative equity. Having negative equity means that you owe more than what your car is worth. For example, if you owe $18,000 on your loan but your vehicle has depreciated to $15,000, you have a negative equity of $3,000. If there is negative equity in your vehicle, it’s in your best interest to transfer your car loan to another person.
You can easily transfer a car loan to another person in Canada if it makes sense for your finances. Follow our step-by-step guide for how to transfer an auto loan, and learn when a car finance takeover might be the best option for your personal situation.
Frequently asked questions about transferring a car loan in Canada
This depends on which lender you're working with. Each one will have different fees and requirements you need to fulfill for a car loan takeover.
Typically, no. The person who takes over your loan will usually need to have a good to excellent credit score to take over your loan. At the very least, they should have a credit score that's equal to or higher than the score you applied with when you were first approved for the loan.
This depends on whether you have positive or negative equity accrued in your vehicle. If your car is worth more than what you owe, you would lose money by doing a loan transfer with no other form of compensation. If there's negative equity in your vehicle, you likely won't lose money unless you have to pay administrative fees to initiate the transfer.
Some of the most common options to avoid transferring your car loan to another person include refinancing your loan to get better terms or selling your vehicle for a profit to pay off your loan. You may also be able to trade your vehicle in for a less expensive model to break even on your payments.
No. Your credit score won't be affected if you transfer your car loan to another person. The only way your credit score will go down is if you miss payments on your outstanding loan.
Claire Horwood is a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, and an Associate’s Degree in Science from Camosun College. Much of Claire’s coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. In her spare time, Claire enjoys rock climbing, travelling and drinking inordinate amounts of coffee.
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