How do I transfer an auto loan?
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UPDATED: Nov 13, 2012
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It is relatively straightforward to transfer an auto loan and vehicle to a friend or buyer. Either the new owner will arrange for financing to pay off the existing loan or the current loan will be modified upon transfer to a new owner.
Current owners and borrowers should first contact their auto loan lender and inform them of their desire to sell the vehicle. It is important to inform the lender that a new owner is standing by to purchase the vehicle. The lender should be given the new potential owner’s contact information as well as any information relevant to financial ownership of the vehicle.
Borrowers should review the details of the auto loan with the new prospective owner and answer any auto loan related questions they may have. It is important to discuss the details of the car’s financing so the new owner understands that they are solely responsible for the vehicle and any future payments.
Prospective owners should check their credit score in order to ensure their selected lender will approve them for an auto loan. A down payment may be required for prospective owners with less-than-satisfactory credit scores.
If the existing owner plans to pay off their auto loan prior to transferring ownership of the vehicle then a lender need not be involved in the process since the debt will have been terminated.
In the event an auto loan is being transferred, the new owner must meet the insurance requirements stipulated in the existing financing’s agreement. Speaking to the lender is usually the fastest method to check whether or not the new owner is qualified. Current owners should try and work with the potential new owners in order to fix any insurance coverage shortcomings. This can become quite complex since three parties (the current owner, potential new owner, and lender) are all involved.
Once the lender approves of the new owner, all that is left to do is to have the new owner sign all the necessary paperwork in order to complete the transfer. After this, the former owner should request and receive written confirmation from the lender that they are no longer responsible for payments now that the financing has been transferred. All records concerning the vehicle’s financing should no longer list the name and personal information of the original or former owner.