When you assume an auto loan, you take over the car payments of the original buyer and gain ownership of the vehicle. However, not every lender will allow auto loan assumption, and not every buyer will be approved to enter into an existing contract.
How to Assume a Car Loan
Auto loan assumption is appealing to some buyers because many of the fees that are associated with new loan contracts have already been paid by the initial buyer. But, assuming a loan requires more than just picking up where someone else left off. In fact, the requirements are similar to what is necessary to initiate a new auto loan.
- The lender must allow the loan to be assumed. Not every loan provider is willing to do this, so make sure that assuming the loan for the car you want is even an option. Otherwise, you will need to engage in the process of buying a car with a lien on it.
- You must be approved to take over the loan. Your credit report will be pulled by the lender, and your income will be weighed against your existing debt in order for the lender to determine whether or not you will be able to make the necessary payments.
- You will sign a loan agreement. Make sure that all of the terms are acceptable, and that you understand all of the details of the contract. Pay careful attention to when your first payment is due. Because the billing cycle probably won't change, the next installment may be due very quickly.
- Proof of insurance must be provided. Before you can assume car ownership, you must show that you have whatever coverage is required by your state. A good guideline to follow is to get premium quotes from at least 3 different providers so that you can be sure you're getting the best possible rate.
- Make your payments on time, every time. As mentioned before, these payments will start immediately. If you ever foresee difficulty in making a payment on time, contact your financial institution to see if they can provide an extension or some other kind of assistance. Otherwise, your credit could be negatively impacted.
If you have moderately to severely damaged credit, you may not be able to assume an auto loan. Fortunately, there are car buying options specifically for buyers with credit issues.
Buying a Car with Less Than Perfect Credit
If you need to purchase a new or used car, but are afraid that your bad credit will prevent you from being approved for financing, Auto Credit Express can help. We will connect you with a dealer who is qualified to handle your unique situation. All you have to do to get started is fill out one simple, fast and secure online application.
