by Aidan Kang, CFA
Senior Writer
UPDATED: October 26, 2022

Paying your car loan monthly won’t be a problem as long as your finances are good. But what if your financial situation has recently changed? What can you do with your car loan? You’re probably wondering, “Can I transfer my car loan to another person?

Yes, it’s possible to transfer your car loan to someone else. However, it’s a decision that should not be taken lightly. You should weigh the pros and the cons. Is losing the positive equity in your vehicle worth it as long as you no longer have to make monthly car loan payments?

What are the Common Reasons to Transfer a Car Loan to Another Person?

You may want to transfer your auto loan to another person for a number of considerations, such as the following:

  • You no longer want the car.
  • You plan to purchase a cheaper vehicle.
  • You can no longer afford to pay the loan.
  • Your car is at risk of being repossessed.

What are the Benefits of Transferring Your Auto Loan to Another Person?

  • You no longer need to make payments.
  • You won’t run the risk of defaulting on your car loan.
  • You can buy a new vehicle if you want.
  • You can save the money that you would have spent on car ownership if you decide to go without a vehicle.

What are the Disadvantages of Transferring Your Car Loan to Another Person?

You’ll lose the positive equity that may have accumulated in the vehicle. Many car owners don’t want to lose the money they put into the car and that’s why they prefer to refinance their auto loan to get better terms or sell it for a price that’s more than the value of the car loan. However, these may not be good options if you’re at risk of defaulting on your payments. You can avoid paying penalty fees, mounting debt, having a lower credit score, and even repossession by transferring your car loan to someone else as soon as you can.

What is Positive and Negative Equity?

Your car has positive equity if its value is higher than your auto loan balance. For example, if your vehicle is worth $25,000 and you have a remaining car loan balance of $7,500, your car’s positive equity is $17,500. If that’s the case, then refinancing an auto loan or selling the vehicle and using part of the proceeds to pay off the loan makes more sense.

Meanwhile, your car has negative equity if your loan balance is higher than the value of your car. In this situation, it’s better to transfer your auto loan to another person.

How Do You Transfer a Car Loan to Another Person?

When you transfer a car loan, you need to find a person who’s willing to take your car and assume the responsibility of paying for the remaining balance of your car loan. Of course, you need to inform your lender that someone wants to assume the ownership of your vehicle and the remaining loan balance that comes with it. The lender will run a credit check on the interested party to make sure that they meet the requirements of the existing car loan or are eligible for a car loan refinancing.

What are the Steps Involved in Transferring a Car Loan?

  1. Contact your lender or car dealer and ask about the requirements for a car loan transfer. You need to make sure that your bank, lender, or car dealer allows car loan transfers. If not, you may have to look for other options like selling your car or refinancing your car loan.
  2. Ask if there are any restrictions that may prevent you from transferring the loan like missed payments or if the lender won’t agree to a car loan transfer or the buyer doesn’t meet the minimum credit requirement. Lenders have to follow different processes but to give you an idea, a minimum credit score of FICO 660 is required to qualify for a car loan.  
  3. Don’t forget to ask about the fees or charges associated with the car loan balance transfer. This will help you decide whether you’ll pay for them all or if you’ll have to ask the buyer to shoulder these charges for you.
  4. Submit all the needed documents. Ask the lender what forms to fill out and what paperwork you have to provide.
  5. At this point, you may or may not have a buyer already. Many car loan transfers happen between close friends or family members. If you already have someone who’s willing to assume the car loan, then the next step is to bring the buyer to the lender and complete the loan transfer. If not, you can look for a possible buyer by posting a listing about the car loan transfer on a public marketplace, such as Craigslist. If someone is interested, show them your car and make sure to explain what is involved in a car loan transfer.
  6. Go to your car dealer or lender and complete the car loan transfer.
  7. Transfer the ownership of the car to the new owner by going to your local insurance agency and ask for the car to be registered and insured under the name of the new car owner.

What are the Problems You May Encounter if You Want to Transfer Your Car Loan?

  • It may be difficult to find a qualified buyer.
  • Your lender or car dealer may not agree to a car loan transfer.
  • You may have to pay for transfer fees.
  • You will lose your car’s positive equity (if it has one)

What are the Alternatives to a Car Loan Transfer?

If you’re not yet sure if a car loan transfer is the best option for you, you may have to check out some alternatives.

  • Car Loan Refinancing – If you can no longer afford to make payments on your car loan but you still have a good credit score, you should consider a car loan refinancing. Getting your auto loan refinanced will allow you to get better repayment terms and maybe even lower interest rates.
  • Sell The Car – If you have accumulated a decent amount of positive equity in your car, you can sell the vehicle and use part of the proceeds to pay off your outstanding car loan balance. Plus, you can use the remaining amount to buy a cheaper car if you want to.

Can you Transfer a Car Loan to Another Bank or Lender?

Aside from transferring your car loan to another person, you can also transfer it to a new bank or lender. Each lender or bank has different requirements and terms for their car loan balance transfer.

Here are the important considerations before a car loan balance transfer:

  1. Make sure that you are eligible (age, income, and credit score) based on the bank’s requirements.
  2. Assess the quality of service that the new lender or bank will provide.
  3. Know the interest rate. A car loan balance transfer makes more sense if the new bank or lender offers you better interest rates and payment terms than the current one you had.
  4. Prepare all the needed documents, including the bank statement, loan statement, and proof of income.

Can you Transfer a Car Loan to Another Car?

Whether you need a newer car or a bigger car, you can trade-in your existing vehicle and roll in the current car loan into the new car that you wish to buy. Make sure to negotiate the best possible price, interest rate, and term before you purchase the car. Unfortunately, rolling your existing loan to a new car loan could mean that you will owe more on the loan than the actual value of your car. You can still sell the car in the future, but you’re unlikely to recoup your losses.

One of the most common problems among car owners is that they tend to purchase a car that they can’t afford. Many of them end up with high monthly car payments, which causes them to struggle with their other financial obligations. So, before you transfer a car loan to another, make sure that you know how much you can afford to pay every month. Avoid making impulse purchases, especially when it involves a significant investment, such as a car purchase.

A Word of Caution

Don’t be tempted to let another person make car loan payments on your behalf and allow them to use your car in return without going through the actual process of a car loan transfer. Remember that the car loan is still under your name and that means you’re still liable for any late or missed payments even if someone else is using your car and paying the loan on your behalf. Aside from that, these will show up as negative marks on your credit report.


Transferring a car loan to another person is a good option for people who no longer want their vehicle and the loan that comes with it. You just need to find an eligible buyer who is willing to take your car and assume your remaining loan balance. But a car loan transfer isn’t your only option. You can also go for a car loan refinancing or sell your car and use the proceeds to pay your outstanding loan balance and use the remaining amount as you wish.