Can a Car Loan be Transferred to Someone Else? Fortunately, some auto loan lenders allow it. Sometimes, you find yourself in a nasty financial storm such as divorce and it severely affects your income. If you don’t want to seek car refinancing, then transferring your car loan to a friend or relative can help you to retain your car.
On the other hand, perhaps your boss finally gave you a huge promotion. Now that you have a better salary, perhaps you now want to buy a better car that reflects your newfound success.
How Can a Car Loan be Transferred to Someone Else?
If you’re lucky to come across a car dealership that allows you to transfer your outstanding car loan to someone else, the new buyer will need to fulfill these following conditions.
1.Excellent Credit Score
First, your creditor will ask you to bring someone with a credit score above 719. Since you’re introducing a new credit buyer, it’s important for your creditor to assess their creditworthiness. Credit scores ranging from 720-850 are reliable indicators that the new buyer pays all his debts on time.
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2. High Net Income
In order to pay auto loan installments on time, a buyer needs a decent stable income. Creditors assess one’s ability to repay credit based on how much is left after deducting taxes, other debts, and utilities. If the new buyer has a net income of $3,000 plus an excellent credit score, you’re almost guaranteed of a successful car loan transfer.
3. Long history with the current employer
After assessing your proposed buyer’s net income, creditors want to determine the probability of credit default. One way of doing this is requesting the proposed buyer to submit copies of paychecks for the past six months. In addition, the creditor can make a phone call to verify the proposed buyer’s history with their current employer.
It’s advisable to look for proposed buyers who are either civil servants or successful business owners.
4. Maintained their current residence for more than a year
Serial credit defaulters are notorious for constantly relocating in order to shake off auctioneers and repo men.
Truth is, it costs a lot of time and money to pursue serial credit defaulters. Creditors minimize this risk by only providing auto loans to people who’ve stayed at their current residence for more than a year. Don’t be surprised if the auto loan lender requests the apartment manager’s number to verify details concerning residency.
What are some of the consequences of transferring my car loan to someone else?
1. Significant Loss of Credit Score Points
Payment history accounts for 35 % of your credit score. Requesting a car loan transfer to someone else other than a refinancing creditor directly affects your payment history. Your car loan creditor will report incomplete payment of your outstanding balance to credit reference bureaus. It will only take 90 days to notice this negative effect on your credit rating.
A huge dip in your credit score will force you to accept high-interest credit terms whenever applying for a new credit card or mortgage.
2. Expensive loan transfer costs
A car loan transfer takes some time because your car loan lender needs to fill out forms and submit them to the car dealership. Plus, your creditor will incur some merchant fees in the process.
Creditors usually discourage car loan transfers by imposing high loan transfer costs. You’ll have to pay a transaction fee that’s in the thousands. Some creditors might even demand a full month’s installment up front in addition to the loan transfer fee.
Unfortunately, the car dealer expects you to pay these costs instead of your proposed buyer.
3. Additional costs incurred while transferring insurance premiums
After successfully obtaining a car loan transfer, it’s your duty to inform your car’s insurance company about the change of ownership. You’ll fill out some forms and pay the required fee. In addition, you need to bring the new car buyer to fill out insurance premium forms.
One major limitation of insurance transfer is it’s time-consuming. Your insurance company needs some time to verify information provided by the new car buyer. Plus, the entire process can take more than a month. In case the transfer is far from complete, you’ll have to pay the outstanding premiums.
Are there better alternatives to transferring my car loan to someone else?
1. Request for a car loan modification
Auto loan providers allow car buyers to renegotiate their monthly installments by modifying the repayment period. When you request for a longer repayment period, your monthly installments reduce because the creditor spreads your debt across more months.
The good news about car loan modification is that you don’t pay any charges. Moreover, your creditor can modify your auto loan within a week. Perhaps the biggest advantage of this approach is that you don’t lose any credit score points.
2. Get a credit union loan
If you owe less than $10,000 you can pay off this outstanding balance in one payment by getting an affordable credit union loan. Credit unions have a reputation for offering friendly interest rates and repayment periods that are long compared to typical commercial bank loans.
When you pay off your outstanding car loan balance in one payment, your creditor hands over the car title to you without delay. This enables you to sell off the motor vehicle anytime you want. After selling off your car, you can pay your credit union loan and still have enough money to pay a deposit for a better car.
3. Apply for a car refinancing plan
A car refinancing plan is whereby you request a new creditor to take over your outstanding auto loan balance. The new creditor agrees to pay off your outstanding balance and in return, you pay the debt under new terms. Car refinancing is popular because it lowers each monthly payment significantly. However, you’ll spend more money compared to your initial auto loan.
It’s advisable to seek a car refinancing plan from the same auto loan lender in order to minimize loss of credit score points.
Can Someone else take over my car payments? Yes, but it’s costly
Based on the facts explained in this post, we’ve seen that transferring your car loan to someone else is a costly and time-consuming process. You’ll have to endure high -interest credit cards and monthly mortgage installments because creditors rely on your credit score to determine suitable payment plans.
If you have bad credit, why not obtain a bad credit car loan refinancing plan from Complete Auto Loans?
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