Sometimes your car becomes too much to handle, and you have decided to sell it. But what about the car loan you have taken to buy the car. The logical thing to do is first to repay the loan then sell the vehicle.
But if you are unable to pay the loan, then you can transfer the car loan in the name of another person. But to do that you need to surrender your car ownership to the bank. The bank will allow you to transfer the car loan only if you meet certain conditions.
Below is the process of how to transfer your car loan to another person:
Check your Loan Agreement
Always check your car loan agreement whether it clearly states if it is possible to transfer your loan to another person. If not, contact your bank and get clarification on the options of transfer and the process. If the loan agreement says that the car loan is not transferrable, then it will be tough to transfer it.
Finding a Suitable New Borrower
Finding a person who is willing to take on the loan and the ownership of your vehicle is not easy. Do proper research about the car while finding new borrower. Transferring the loan along with the vehicle will reduce the price of the vehicle. It can be a big reason for a borrower to take an interest in it. But this will depend on how much of the loan is to be paid by the new borrower.
Check the Borrower’s Credibility
The person taking over the car loan must be capable of paying the loan. This person should not have defaulted on any loan previously. Select a person who has a steady income and a good credit score. The new borrower has to submit KYC documents as per the requirement of the bank.
Check for Car Dealerships
Take help of a car dealer if you are unable to find a buyer for the car and car loan. These dealerships have experience of dealing with such issues, and it might be more comfortable finding a buyer through the car dealer.
Transferring the Car Registration
Before transfer the loan you will need to transfer the registration of the car as well. To do this, visit the closest Regional Transportation Office (RTO).
The authorities will first do a background check with the bank before they change the name in the Registration Certificate after paying certain charges.
Check with the car insurance provider so that you get their consent on transferring the car insurance policy as well. After submitting the documents to the insurance provider transfer will be done. With this, you will not have to pay the premiums for an insurance policy that you are not using.
The person in who name the car loan will be transferred will have to submit the following documentation.
- ID proof
- Address proof
- Income proof
The bank might request more documentation as per their need.
Fees and Charges
Banks may levy processing fees and transfer fees for change of the loan borrower. Depending on the remaining loan tenure and principal, the charges will vary. Contact your lenders to find out the fees related to the transfer process.