How to Transfer a Car Loan to a Family Member

You can transfer a car loan to a family member. However, you have to be willing to give up ownership of the car. It is also dependent on whether or not the lender will approve and there are usually stipulations involved, so the process has the potential to stop there.

• Financial assistance - Transferring a car loan to a family member can be a way to provide financial assistance. It allows the family member to take over the loan payments and potentially benefit from the existing loan terms, such as interest rates or repayment terms, which may be more favorable than what they would obtain on their own.
• Sharing financial responsibility - Transferring a car loan to a family member can help share the financial burden. If the original borrower is facing financial difficulties or is unable to continue making payments, transferring the loan to a family member who is in a better financial position can ensure that the loan remains current and prevent default or repossession.
• Change in ownership - If you want to transfer ownership of the car to a family member, it may be necessary to transfer the car loan as well. This often occurs in situations such as parents gifting a car to their child or passing down a vehicle within the family.
• Lower interest rates - If the family member has a better credit score or financial standing than you do, transferring the car loan to them may result in a lower interest rate. This can save money on interest payments over the life of the loan.
• Simplifying finances - Transferring a car loan to a family member can help simplify finances, especially if you want to consolidate their debts or reduce their financial obligations. By transferring the loan, you can eliminate a monthly payment and focus on other financial priorities.
• Building credit history - If the family member has limited or no credit history, assuming a car loan can be an opportunity to establish or improve their credit score. By making timely payments on the transferred loan, the family member can build a positive credit history, which can be beneficial for future financial endeavors.
• You are moving - If you are moving it may not be necessary to take your car with you, as you may utilize public transportation instead. You may also move to a neighborhood or country where everything is within walking distance.

Once you have decided to transfer your car loan to a family member, it is important to know the steps and process. 

1. Check the contract fine print

Carefully review the existing car loan agreement to understand the terms, conditions and any restrictions related to loan transfer or assumption. Identify whether the lender allows loan transfers and if there are any specific requirements or fees associated with the process. 

2. Contact your lender  

Reach out to the lender to inquire about their loan transfer policies and procedures. Discuss the possibility of transferring the loan to a family member and ask for guidance on the next steps. Make sure you have prepared what to say with a solid explanation. Ask about fees associated with the process, as well as what the assumption criteria are for the family member. The lender will provide specific instructions and may require additional information or documentation. This documentation may include items such as driver’s licenses and a bill of sale. 

3. Choose a family member 

While you may want to choose a family member based on the relationship and trust, you also need to consider their eligibility. Determine if the family member meets the lender's criteria for assuming or refinancing the loan. This typically involves evaluating their creditworthiness, income stability, and ability to take on the financial responsibility of the loan. The family member may need to provide documentation such as income verification, credit history and identification.

4. Apply

Next, the family member will need to file a loan assumption application, providing the required documentation for both you, the original borrower, and the family member. You will then need to wait and obtain approval from the lender. The lender will assess the family member's creditworthiness and make a decision based on their criteria. 

5. Update title and insurance 

Inform your car insurance provider about the loan transfer and update the policy accordingly. The family member should be listed as the primary borrower and owner of the vehicle in the insurance documents. They will also need to make sure they are adding the vehicle to their insurance. Depending on state regulations, the title may go to the lender instead of the chosen family member. 

6. Ongoing Communication

Communication is key to any relationship. When going through an important transaction such as transferring a car loan, it is important to maintain open communication with the lender, the family member and any other relevant parties throughout the process. Address any questions or concerns promptly and keep everyone informed of the progress.

Perhaps this process feels too complicated or the lender does not allow you to move forward with the process. You do have other alternatives including:

• Refinancing - You can explore refinancing options to obtain a new loan in their name with more favorable terms. Refinancing involves applying for a new loan with a different lender to pay off the existing loan. This can potentially lower the interest rate, extend the loan term, or modify other loan terms to make the monthly payments more affordable.
• Sell your car - If you want to transfer the financial responsibility and ownership of the car, consider selling the vehicle to the family member. The family member can then secure their own financing or pay for the car using their own funds. This option eliminates the need for a loan transfer and allows the family member to take full ownership and responsibility for the vehicle.
• Co-signing - Instead of transferring the loan, the family member can co-sign the loan with you. This option allows both parties to share the financial responsibility for the loan. However, it's important to note that co-signing comes with its own risks, as both parties are equally liable for loan repayments, and any missed payments can negatively impact both credit scores.
• Car subscription - A car subscription is a hassle-free way to car ownership and  an alternative to traditional car buying, leasing and renting. It provides the flexibility to subscribe to a vehicle for 6-12 months rather than committing to  long-term ownership or lease agreement. With FINN, you also get the peace of mind with insurance, maintenance and roadside assistance included.

While it may be possible to transfer a car loan to a family member for a number of reasons, there are also some alternatives in case the car transfer is not a possibility. FINN is a valuable alternative to helping with your current situation. It will allow flexibility, along with ease of use. Explore your dream car with FINN today and learn how you can have a quality vehicle delivered directly to your doorstep.