You can’t just transfer your car loan to someone else. The new owner needs to refinance your current loan, and, at the same time, get the title transferred so it's in their name. This means the new owner has to be able to qualify to refinance, you have to sign the title over to them, and they need to visit the DMV or Secretary of State to have the title transferred.
Preparing to Refinance a Car Loan
The person who plans on taking over the auto loan needs to qualify for refinancing. This means meeting the lender’s basic income and credit requirements.
Different lenders have different qualifications, but they generally require a good credit score and a certain amount of minimum income – enough to cover the monthly vehicle and insurance payments. Some lenders may ask for proof of income, too.
To help the new borrower better prepare for the refinancing process, make sure they do these three things:
- Check their credit – Most lenders check FICO credit scores, and borrowers can view it in many different ways. See if their bank, credit union, or credit card provider offers free access. If not, they may need to check their credit score for a small fee from a third party or FICO themselves. Once they know their score, borrowers should go to www.annualcreditreport.com and request their credit reports. They’re entitled to a free copy every 12 months from each of the three national credit bureaus (TransUnion, Equifax, and Experian). Carefully go over them and look for negative errors or incorrect information that can be disputed directly with the credit bureaus.
- Have documents ready – Just in case the lender asks, borrowers should make sure to bring in proof of income in the form of a recent paycheck stub, proof of residency in the form of a recent utility bill addressed to them, and proof of identification in the form of their driver’s license.
- Rate shop – Rate shopping with many different lenders helps borrowers find the best deal when refinancing a car loan. The new borrower can go to the current lender, but it’s also a good idea to see what else is out there by applying with additional lenders. All hard inquiries made on their credit for the same type of credit within a 14-day time frame only counts against their credit score as one single hard inquiry, so rate shopping doesn't have a big impact.
When Does it Not Make Sense to Refinance?
There are right and wrong times to refinance an auto loan. If you and the person you're trying to transfer your loan to aren't sure about timing, refer back to these situations:
- Your vehicle doesn't qualify – The car has to meet the lender's mileage and age restrictions in order to qualify. If your vehicle is too old or has too many miles, a lender is going to turn you down for refinancing.
- You’re upside down – Most lenders don't approve borrowers for refinancing if they have negative equity, which means you owe more on your loan than your car’s actual cash value.
- You have pre-payment penalties – Some auto loans come with pre-payment penalties, although this is rare these days. If this is the case, refinancing won't be worth it if these penalties cancel out any savings.
The Bottom Line
As long as the new borrower qualifies for refinancing on their own, transferring your car loan to someone else shouldn’t be an issue. If you're looking to refinance your auto loan, you can fill out our secure refinancing request form.
On the other hand, if you need help finding financing because you have bad credit, Auto Credit Express is here for you. We match consumers to local dealers that can handle unique credit situations, such as bad credit, no credit, and bankruptcy. To get started right now, fill out our free and simple car loan request form.