It is not possible to transfer a car loan from person to another by any official means. When a borrower is given a loan for an automobile, that loan is intended for them and them alone, and they are solely responsible for paying it back unless they had someone co-sign on the loan for them. However, when a person is stuck with a car loan that they cannot afford, there are some alternatives to transferring the loan.
Why You Cannot Transfer a Car Loan
The reason it is not technically possible to transfer an auto loan to another person is because your loan was given to you based on your credit history and financial standing. If you were to transfer the loan to another person, the lender runs the risk of that person not being able to fulfill the loan agreement. The terms of the loan agreement would also no longer be specific to the borrower it was intended for.
Swap Your Loan
Although it is technically impossible to transfer your loan to another person, you can unofficially transfer your loan to someone else by performing what's called "swapping a loan." Swapping a loan is when you have an interested buyer take out a loan for the remainder amount of your loan, hand the money over to you and then use that money to pay off your loan. It is essentially the same as selling your car to someone who already has the cash to buy it for the full amount or remainder of the loan.
Transfer Lenders
You can transfer your loan to a different lender. Changing lenders for a better interest rate will make your loan more affordable. However, in most cases, your current lender will charge you penalty fee for doing this. Read your loan agreement to find out the penalties for transferring to another lender before you decide to do this.
Hire Purchase Agreement
Car loans for vehicles purchased from a car dealer often include a hire purchase agreement. A hire purchase agreement allows you to return your vehicle without being held to any future payments after you have paid back 50 percent of your loan. Unfortunately, you will lose your past payments by doing this and may have to pay for any repairs the car needs.
Two-Week Grace Period
As long as you did not sign your loan agreement on the dealer's premises, you are typically given a two-week period to consider the loan. During this grace period, you can back out of your loan without incurring any penalties.
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