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Transferring a car loan to another person can be a bit of a process and it’s often easier to pay your loan off before you sell your vehicle. That said, there are measures you can take if you no longer want your vehicle or the loan that comes with it. The difficult part is typically finding a buyer who’s willing to take over a loan and taking the financial hit that comes with losing any positive equity that might be built up in the vehicle.
Keep reading to find out more about how to transfer a car loan to another person and learn what other alternatives might serve you better in the long run.
It is possible to transfer a car loan to another person, though it should only be done when absolutely necessary. Some of the reasons you might want to transfer a car loan are that you can no longer make your payments and your vehicle is in danger of being repossessed. You may also want to transfer your loan to buy a less expensive vehicle.
One of the main downfalls of transferring your car loan is that you won’t get any of the positive equity accrued in your vehicle. This means that you’ll lose all of the payments that you put into it prior to transferring. This is why many borrowers choose to refinance their car loans to get better terms, or sell their vehicles for more than the loan is worth to turn a profit on the sale.
Just be aware that these are only viable solutions in cases where your vehicle is worth more than your outstanding loan. It’s also important to note that these solutions only work if you have a bit of time on your hands. If you’re in danger of defaulting on payments, you may need to cut your losses and attempt to transfer your car loan to another person as soon as possible.
Positive equity exists when your vehicle is worth more than the amount you owe on it. For example, if your car is worth $20,000 and you owe $5,000 to pay it off, your positive equity will be $15,000. If you have positive equity in your vehicle, it might make more sense to refinance your loan or sell your car to pay the loan off and keep the remaining balance.
Negative equity is when you owe more than 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.
A car loan transfer involves transferring a vehicle that has money left owing on it to another person who is willing to assume the remaining payments. Most buyers won’t want to take on an outstanding loan as it seems an arduous process to navigate. That said, it can be relatively easy as long as you know what you’re doing.
The main way to transfer your loan to another person is to go back to your current lender and let them know that the person wants to take over ownership of your vehicle. From there, your lender will want to run that person through a credit check and make sure that they meet all the eligibility criteria to refinance the loan or meet the requirements of the loan contract that’s already in place.
It’s relatively easy to transfer a car loan to another person if this seems like the best solution for you. Follow these steps to get started:
There are a handful of benefits when you transfer a car loan to another person:
Transferring a car loan to another person comes with its fair share of drawbacks as well. These include the following:
While transferring a car loan may seem like the best option if you can’t make your payments or want to get rid of your loan, it’s not always the most cost-effective solution. The following options may be a better fit depending on your circumstances:
Transferring a car loan to another person doesn’t have to be difficult, but it can be a costly process. For this reason, it should be avoided where other alternatives might serve you better. Find out more about how you can transfer a car loan to another person, and learn more about what else you can do to reduce your payments or get rid of your car loan and still turn a profit.
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