When responsibility for an auto loan is being taken over by someone else, the loan needs to be officially transferred. You will need to transfer an auto loan if you are privately selling a vehicle that is not yet paid off, are giving the car to a someone before it is paid for, or decide to move the financing into your spouse’s or other trusted partner’s name. The steps to transferring an auto loan are relatively simple, as long as they are done correctly.
Refinancing the Loan
The first step in transferring an auto loan is refinancing the original financing agreement. The new loan holder may not be qualified for the terms of the loan you were approved for. The financing company or dealership you got the original loan from will check the transfer recipient’s credit score and other financial factors in order to determine the interest rate, monthly payments, and other terms of the refinanced loan. The person you are transferring the loan to will sign the agreement and become responsible for the payments.
Title Ownership
The next step in transferring an auto loan may be modifying the car’s title depending on the circumstances that initiated the transfer. For example, if the loan transfer is the result of selling or giving away the car, you will need to alter the title to reflect the new owner. To change a car’s title, both you and the new owner will need to go to the local DMV with valid and accepted forms of identification. An official bill of sale will need to be completed, as well. Standard bill of sale forms can be downloaded from the Internet for free.
Never name a new owner on a car’s title until after the loan is transferred to avoid the new owner refusing to sign the refinancing papers. This would mean you are financially responsible for a car you no longer own.
Insurance
Whether you are retaining primary ownership of the car or selling it outright to the new loan recipient, your insurance policy will need to be changed. Once the loan is transferred, and the title is altered to reflect any ownership changes, you should make the necessary insurance modifications. You will need to either cancel your policy entirely or add the new loan recipient to your existing policy.
In three simple steps, you can transfer your auto loan to a new responsible party and change the other pertinent documentation affected by the transfer. Do not take the simplicity for granted, though, as transferring your auto loan is a serious decision to make.
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