Can You Transfer a Car Loan to Someone Else?

Banks do not allow car loan transfers for various reasons. Loan terms are based on credit history and income; the person you want to transfer to likely has a different credit score, history and income than you. The loan is based on your vehicle's value, which has likely changed since you initiated your loan. To end your loan, you must sell your vehicle. The person you want to transfer your loan to must apply for financing of his own to purchase the car from you and your lender.

Loan Determination

Most lenders base approved interest rates on a tier scale. While lenders advertise their lowest rates, usually only excellent credit borrowers can obtain approval for the best rates. Vehicle age and mileage also influences loan rates and term. Depending on approved tier, rates may increase by one interest rate point or more. Loan determining factors also include income, term applied for, vehicle and credit history. For this reason, approved interest rates, term and down payment requirements may be different for another borrower.

Buyer's Application

The person you want to transfer your loan to is considered the vehicle's buyer. To help speed the selling process, ask the buyer to apply for his loan through your lender. This way, the loan is paid off quickly and most of the paperwork is handled by your lender. The buyer can also apply to a different lender. To release ownership of the vehicle, you must satisfy your loan balance. You or the buyer must come up with the remaining loan balance due if the sales price or approval amount is not enough to cover the balance.

Additional Buyer Charges

Because the vehicle loan can't be "transferred," the buyer can expect to pay all applicable purchase fees as required by your state. Most states charge taxes on a vehicle purchase, so the buyer will have to come up with her tax fees as a down payment, or apply for a larger loan amount than expected. The buyer must also pay your state's registration and title application fees. Most states also require some form of inspection or emission testing upon the transfer of ownership.

Another Option

If you want to remain the vehicle's co-owner, you can add your buyer to your car loan. You will have to reapply for finance either at your lender or another, also known as a refinance. You can avoid paying additional taxes and state fees this way. With good credit, you and your co-owner can likely lower the loan's monthly payment amount if lower interest rates are available. You can also use a down payment or increase the loan term to lower monthly payments.