Can I Transfer a Car Loan to Someone Else?

Transferring a car loan means shifting the financial responsibility for a vehicle from one person to another. While a direct transfer is not straightforward, lenders generally do not offer this option. Instead, individuals seeking to transfer a car loan require specific methods that involve a new financial arrangement. These processes ensure the lender’s interests remain protected by establishing a new responsible party for the existing debt.

Lender Requirements and Approval

Before any car loan obligation can transfer, lenders evaluate the financial standing of the prospective new borrower. This assessment focuses on their ability to reliably repay the loan amount. Lenders scrutinize creditworthiness, examining credit scores and credit history. A score of 661 or higher is generally considered favorable for traditional auto loan terms. [3, 4]

Lenders also analyze income stability, seeking consistent employment and earnings to cover monthly payments. They assess the debt-to-income (DTI) ratio, which compares total monthly debt obligations to gross monthly income. Many lenders prefer a DTI below 36%, though some may approve loans for individuals with a DTI up to 45% or 50%, particularly in the subprime market. [2, 7, 8, 10] This review helps lenders determine the risk associated with transferring the financial obligation to a new individual.

Refinancing as a Transfer Method

Refinancing is the most common indirect method to transfer a car loan, replacing the original loan with a new one under a different borrower. This process begins with the prospective new borrower applying for a new auto loan in their own name. The new lender conducts a financial review, evaluating credit history, income, and debt-to-income ratio. Once approved, the funds from this new loan pay off the original car loan entirely.

Upon repayment, the original borrower is released from their obligation, and the vehicle’s title is reissued to reflect the new lender’s lien. This method provides a clear separation of financial responsibility, as the original loan is satisfied and replaced by a new agreement. The new borrower assumes all terms and conditions of their newly originated loan, including interest rates and repayment schedules. This approach is widely available and aligns with standard lending practices.

Loan Assumption as a Transfer Method

Loan assumption is a less common, yet more direct, approach to transferring a car loan, where the new borrower takes over the existing loan terms. This method requires the explicit approval of the original lender, as the loan agreement remains active but changes hands. Both the original borrower and the prospective new borrower typically need to apply jointly to the current lender for this type of transfer. The lender performs a financial evaluation of the new applicant, examining their credit profile, income stability, and debt-to-income ratio.

If the new borrower meets the lender’s criteria, the loan agreement is transferred, and the original borrower is released from liability. Not all auto loans or lenders permit assumptions, making this option less universally available compared to refinancing. When an assumption is approved, the new borrower inherits the remaining balance, interest rate, and repayment schedule of the original loan. This process avoids a new loan origination but relies on the original lender’s willingness to allow such a transfer.

Selling the Vehicle

Selling the vehicle provides a practical solution for transferring financial responsibility, though it doesn’t involve a direct loan transfer. The original borrower sells the car to a new owner, using the proceeds to pay off the outstanding loan balance. This method is often simpler than a direct loan transfer or refinancing, especially if the vehicle’s market value exceeds the loan amount. The process involves finding a buyer, agreeing on a sale price, and coordinating with the lender to facilitate the payoff.

Once the loan is fully repaid, the lien on the vehicle’s title is released, allowing the original borrower to transfer the clear title to the new owner. This action removes the original borrower from their financial obligation related to the car. This approach offers a clean break from the loan, as the debt is satisfied, and the vehicle changes ownership independently of any loan assumption.