You’ve reached the end of your rope. You purchased a luxurious automobile while earning a good living, but six months ago, you lost your job and are now far behind on your car loan payments. A cousin offers to pay for your automobile payments while you make up for a lost time. Perhaps you have a buddy who has poor credit but a steady paycheck and a vehicle lying in their driveway ready to be used. You’d want to allow him to cover the expense of your automobile installments in return for allowing him to drive it.
In any of these instances, you may be wondering: Is it possible for someone to assume my auto loan?
The Brief and Tragedy of It
The brief answer, which you will not appreciate: No.
In most cases, when someone buys a car with a loan, the person who sold the car cannot take over that loan. The person who bought the car needs to tell the bank about it to do this. The bank will check on how well they can make monthly payments and their credit score.
Some banks will approve your loan even if you buy the car with someone else’s money. Other banks might negotiate with both parties to agree. And in that situation, the other person would still have to go through all of the same rules as if they were taking out a car loan themselves.
Allowing Them to Drive It as Well
If you need help with what you owe, a friend or family member can pay for your expenses. This might be an option for a few months.
If you want someone else to drive your car, that is more difficult, and the person would need to buy it from you.
If you let a stranger borrow your car, it is risky. You have to get permission from your bank before giving it away. They are not the only owner even if you sell them the car instead of just agreeing to let them use it.
If you sell your car yourself, you won’t have to pay for past-due payments. Additionally, you will avoid the inconvenience of having your automobile impounded. The lender would rather deal with individuals than repossess their vehicles.
Do You Not Have the Ability to Ignore the Bank and Go Rogue?
You may agree with someone to let them drive your car if they can pay you regularly. But what happens if they don’t pay?
If you lend your car to someone else, they can get in an accident. You will be responsible for the cost of the accident if you are not listed as an approved driver on their insurance policy. You may also have to pay for parking fines and tolls if you don’t take care of them before lending out your car.
How to Transfer Your Loan to Another Person in the Right Way
If you decide to forward with your plan to have someone else assume responsibility for your vehicle loan, the following actions must be taken:
Examine the Loan’s Fine Print
Before sitting with a loan person, you need to know the deal. Read it over and over again. Talk to an attorney about contract law for help. If you cannot afford your car payment anymore, trade in your car for one that costs less and refinances the loan to be easier to afford.
Determine the Credit Score of a Prospective New Lessee
Before you contact the bank, make sure you understand what they ask. A credit score is very important to banks because it tells them how likely they are to pay back what they owe. Your bank will be more inclined to lend you money if you have an excellent credit score. But if your credit score is low, it will be hard for your bank to give you money because they might not want to take a risk on someone with bad credit.
Make Contact With Your Lender
Before the person whose name is on the car loan can do anything else, they must contact their bank. They should find out if it is possible to transfer the car loan in someone else’s name. Most banks say no because of a contract with you. If this happens, they can ask about refinancing your auto loan in this person’s name instead.
Attend to Loan Approval
If you’re fortunate, your bank or another lender will allow you to submit a loan application. This might take as little as a few minutes while you wait in the office or as long as several weeks.
If the loan takeover is accepted, the following actions may be taken. Otherwise, you’re back to the beginning.
Sign the Documents!
If your loan is authorized, you will need to sign some paperwork. You will have to give your car title and lien over, so you must have them with you when signing the paperwork. You might also have to talk to the DMV about transferring titles and registrations in the state where you live for it all to go smoothly. The car’s new owner will need a new policy from their own insurance company that is up-to-date with their state’s laws.
Questions That Are Frequently Asked (FAQs)
Who would want to assume responsibility for my auto payments?
It’s difficult to find someone willing to take over your automobile payments if you purchased it brand new. Your car will lose value quickly after you drive it off the lot. If you still owe money on a loan, someone else may not want to pay for that. But if the amount is less than or equal to what it would cost for another person to buy a used car, it will be easier for them.
What happens to your insurance coverage if you allow someone else to take over your automobile payments?
If the car is registered in your name and you continue to drive it after someone else starts paying for the payments, you have to keep up with the insurance. If you want to stop your insurance, you need to transfer ownership of the car completely from yourself to that other person.