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Transferring a Car Loan To Another Person

Transferring a Car Loan To Another Person

Over 85 million Americans have an auto loan, with the average amount financed at $34,948 in 2022. With so many people taking on car debt, situations arise where transferring a loan to someone else seems like a good solution. But is this actually possible with most car loans?

This article will explore whether you can transfer a car loan to another person, the limited situations where it’s allowed, steps in the transfer process, costs involved, and key considerations before attempting a loan transfer. We’ll also provide alternatives if a direct transfer isn’t feasible for your situation.

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When Can You Transfer a Car Loan?

Transferring a car loan from one borrower to another is quite limited with most mainstream auto lenders. This is because the standard auto loan contract prohibits transferring the loan to a new owner. So if you have financing from a major bank, credit union or captive lender like Toyota Financial Services, they will likely reject requests to transfer the loan to someone else.

However, there are some exceptions. A few specialty lenders may allow loan transfers or assumptions in certain circumstances. These are more likely to be small local banks and credit unions rather than large national lenders. The loan contract would need to specifically state the loan is assumable or transferrable.

Your best chance of successfully transferring an auto loan is in a private party sale between family members or friends. For example, you may want to sell your car to a sibling and also transfer them the loan. The lender would still need to approve the new borrower and may adjust the interest rate or terms. But there’s a better chance of getting approved compared to selling to a stranger.

The bottom line is that transferring a car loan requires consent from the lender. They will want to vet the new borrower’s creditworthiness and ability to take over the remaining loan payments. So it’s not as simple as just signing the title over to someone else.


What is an Assumable Car Loan?

An assumable car loan is a type of loan that allows the transfer of debt to another person. With an assumable auto loan, the new borrower takes over the remaining balance and original terms of the loan from the current owner. This means they continue making payments on the same loan, rather than taking out a new loan.

Assumable car loans are uncommon with most mainstream auto lenders like banks and credit unions. They are more commonly offered by some smaller banks, credit unions, and niche lenders. If a car loan is assumable, the original loan documents will state this upfront.

So if you’re wondering “can I transfer my car loan to another person?”, the answer lies in whether you have an assumable auto loan. This type of loan provides the pathway for legally transferring debt to someone else through an assumption process.


Steps to Transfer an Auto Loan

Transferring a car loan to another person involves several key steps that must be taken for the process to be successful. Here is an overview of what’s involved:


Inform Current Lender of Desire to Transfer

The first step is to contact your existing auto loan lender and inform them that you want to transfer the loan to another person. Explain that you wish to sell the vehicle but want the new buyer to take over the remaining loan balance and terms.


Provide Information on the Proposed New Borrower

The lender will request detailed information on the proposed new borrower who will be assuming the loan. This includes their full name, contact details, SIN #, income, employment details, and credit history. You may need to coordinate with the new borrower to collect some of this information.


Lender Vets the New Borrower

Using the provided details, the lender will then vet the potential new borrower. They will run a credit check and evaluate if the person meets the lender’s criteria to take over the loan. Factors like income, credit score, debt levels and history will determine if the borrower is approved.


New Borrower Signs Loan Assumption Contract

If the lender gives the green light, the new borrower will need to formally sign a loan assumption agreement to take legal responsibility for the debt. This contract binds them to the remaining principal balance and original loan terms.


Registration and Insurance Changes

Finally, the new owner must transfer the vehicle registration and insurance over to their name to complete the purchase. At this point, they are the legal owner and borrower.


Costs of Transferring a Car Loan

Transferring a car loan to another person typically involves some costs that you’ll need to factor in. Here are some of the main expenses to expect:


  • Application and Processing Fees – The lender will likely charge fees to process the loan transfer, do credit checks on the new borrower, and handle the paperwork. These fees can range from $100 to over $300 depending on the lender.
  • Interest Rate Changes – Even if the loan is assumable, the new borrower will likely not qualify for the exact same interest rate you had. Their credit score and financial profile will determine the new rate, which could be higher or lower.
  • Taxes – Transferring a loan to a family member may incur gift tax if the sale price is below market value. Work with a tax professional to understand any implications.


While the costs may seem high, run the numbers to see if transferring still makes sense versus paying off the loan yourself or the new owner getting separate financing.


Can You Transfer to Any Person?

When it comes to transferring an auto loan, lenders are usually only willing to consider a transfer between family members or spouses. This is because of the close relationship and implied trust between relatives. Lenders are often hesitant about transferring a loan to an unrelated third party.

Spouses are frequently allowed to assume each other’s auto loans. This can happen during a divorce settlement or if one spouse can no longer make payments. Joint spousal income and shared assets provide the lender confidence in approving a marital transfer.

Transfers between parents and children or siblings may also get approved. The lender will review the new borrower’s income, assets, credit score and existing debt obligations. But the family association can ease doubts about character and intent to pay.

Attempting to transfer an auto loan to a friend, co-worker or other unrelated person is usually denied. Lenders view this as much riskier, even if the new borrower has good credit and income. There is less assurance the new borrower will prioritize repaying someone else’s loan. Unless the loan terms specifically allow for transfers, lenders prefer the original borrower remain responsible.


Credit Score Impact

Transferring an auto loan to another person can affect the credit scores of both the original and new borrower in a few key ways:


First, when the proposed new borrower applies to assume the loan, the lender will conduct a hard inquiry on their credit report. Hard inquiries can cause a small, temporary drop in the new borrower’s credit score.

For the original borrower, once the loan is successfully transferred, they are no longer liable for the debt. This can actually help boost their credit score since the loan balance will no longer count towards their overall utilization ratio.

However, if the new borrower misses or makes late payments, it will not impact the original borrower’s credit. Their score will remain unaffected by the new borrower’s payment history. But it’s important to note that if the new borrower defaults entirely, the original borrower could still be on the hook if they did not receive an official co-signer release.

Overall, transferring a loan to another person has mixed effects on credit scores. The new borrower takes a small temporary hit from the hard inquiry, while the original borrower sees their score go up as liability for the loan balance is removed. But defaults by the new owner could still potentially affect the original borrower down the line.


When Transfer Makes Sense

While mainstream lenders don’t allow transferring auto loans, there are some situations where you may want to transfer a loan to a friend or family member:


  • Selling to Family Member or Friend: If you want to sell your car to a family member or friend, transferring the loan allows them to take over payments on the existing financing. This can make the sale easier by avoiding the need to pay off your loan first.
  • Unable to Afford Payments: If your financial situation changes and you can no longer afford the monthly payments, transferring the loan to someone else (with lender approval) lets you get out from under the loan obligation while allowing the new borrower to obtain the car.
  • Moving and Want Buyer to Take Over Payments: If you are moving somewhere you won’t need the car anymore, finding a buyer who will take over the loan payments allows you to sell the car without having to pay off the entire loan balance.


In these situations, transferring the auto loan to the new owner, rather than requiring them to secure separate financing, can facilitate the sale transaction.


Risks of Transferring a Car Loan

While transferring an auto loan to another person may seem like an easy solution, there are several risks to be aware of before pursuing this option:


Hard to Find Lender Approval

Since most mainstream lenders don’t allow loan transfers, finding one willing to approve a new borrower can be challenging. Many borrowers assume it will be straightforward, only to get rejected by lender after lender in their efforts to transfer the loan.


Transfer Fees Involved

Even if you find a lender willing to authorize the transfer, there will likely be fees charged for processing the request and vetting the new borrower. These transfer fees can range from a couple hundred to over a thousand dollars depending on the lender.


Higher Interest Rates Possible

Depending on the new borrower’s financial profile, the interest rate on the loan could go up after the transfer is completed. This may eliminate any cost savings the original borrower hoped to gain from the transfer.


Original Borrower Still Liable

One major risk to note is that even after transferring the loan, the original borrower still remains responsible for the debt should the new borrower stop making payments. Defaulting on the loan can negatively impact the original borrower’s credit score and history.


Alternatives to Transferring

While transferring a loan can be an option in limited cases, there are other alternatives to explore if your lender does not allow transfers or you don’t qualify:


Sell the Car and Pay Off Loan

One option is to sell the vehicle and use the proceeds to pay off your existing loan balance. This route gives the buyer clear title and ownership, while allowing you to wipe out the debt obligation. However, it does require having enough equity in the vehicle to cover the remaining loan amount.


Refinance Loan in New Buyer’s Name

If you have equity, the new buyer may be able to take out a loan for the purchase price, while you use those funds to pay off your current lender and release the lien. This essentially transfers the financing to the new owner. Qualifying for the new loan and having equity are key.


Voluntary Repossession

You can voluntarily surrender the vehicle to the lender. They will sell it and apply the proceeds to your loan balance. However, you are still responsible for any remaining deficiency and it can severely hurt your credit score.


Trade-in and Roll Debt into New Loan

Trading in the financed vehicle and rolling any negative equity into a new car loan is another option. It gets you out of the current loan, but leads to higher payments and potentially being upside down on the new car.


Questions to Ask When Transferring

If you’re considering transferring your car loan to another person, there are some key questions you’ll want to have answered before moving forward:


Is the loan assumable? The first thing to find out is whether your lender allows loan assumptions or transfers. Check your original loan paperwork or call your lender to ask. Most mainstream lenders don’t allow assumptions, but credit unions and smaller banks sometimes do.


What are the costs? Lenders typically charge fees in the range of a few hundred dollars to process a loan transfer. Ask upfront what application, processing, or transfer fees will apply.


Will the interest rate change? In most cases, the new borrower will be evaluated and receive a new interest rate based on their credit profile. This could be higher or lower than your current rate.


What credit score is needed for approval? Lenders have minimum credit score requirements for taking over a loan, often 640 or higher. Ask your lender what credit criteria the new borrower must meet.


How long does it take? The transfer process can take several weeks to complete as the lender vets the new borrower. Be sure to get an estimate of the timeline so you can plan accordingly.


Finding an Assumable Car Loan

If you’re interested in transferring your car loan to another person, the first step is to find out if you even have an assumable auto loan. Here’s how:


  • Check your loan documents – Look for any mention of the loan being ‘assumable’ or transferable. This will indicate if the lender allows assumptions.
  • Ask your lender directly – Don’t rely solely on documents. Contact your lender and specifically inquire if assumptions or transfers are allowed for your auto loan.
  • Consider credit unions – Credit unions and smaller community banks are more likely to offer assumable loans compared to large national banks.
  • Look into online lenders – Some online lenders provide more flexibility, including the option to make a loan assumable. This gives them a competitive edge.


If you discover your loan is not assumable, don’t lose hope. You may still be able to refinance the loan under the new owner’s name, though it will be treated as a new loan application.


How to Improve Chances of Approval

If you want the best chance of getting a car loan transfer approved, there are a few key things you can do:


  • The buyer should have good credit – Lenders will thoroughly vet the new borrower, checking credit score, debt-to-income ratio, and credit history. A score of 700+ gives the best approval odds.
  • The loan should have equity – If the car is worth more than the remaining loan balance, it shows the asset retains value, reducing risk for the lender.
  • The original borrower has a clean history with the lender – On-time payments and no issues with the lender make them more apt to approve a transfer.


Having these factors in your favor improves the chances of the lender approving a transfer. It shows them the new borrower is creditworthy and the overall risk level is acceptable. If you don’t meet these criteria, explore options to improve them before requesting a transfer.


Final Thoughts

Transferring a car loan to another person is very limited for most mainstream auto lenders. However, some exceptions exist, such as with assumable loans from credit unions or smaller banks. While it may be possible to transfer in certain situations, there are many factors to weigh first.

The key points to recap when considering a car loan transfer include:


  • Most auto loan contracts prohibit transfers to another person
  • Specialty lenders may allow transfers if the new borrower qualifies
  • An assumable loan specifically states the loan can transfer
  • Lender approval, fees, and credit checks are required
  • Interest rate and terms may change with a new borrower
  • Weigh the pros and cons carefully before pursuing a transfer
  • Make sure the new borrower can afford the monthly payments
  • Work directly with your lender if you want to attempt a transfer


While it is limited, transferring an auto loan to another person is possible in some situations. By understanding the requirements, costs, and process, you can determine if a car loan transfer makes sense for your situation.


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Questions About Transferring a Car Loan To Another Person

It is possible to transfer a car loan to another person in Canada, but it can be challenging. The process will vary depending on your lender and loan terms, but here are the key steps:


  1. Review your loan agreement: Check if your loan has a clause allowing for transfers or assumptions. If not, you will need consent from the lender.


  1. Contact your lender: Explain why you want to transfer the loan and provide information on creditworthiness of new borrower. The lender will evaluate if the transfer meets their criteria.


  1. Pay any applicable fees: Most lenders charge assumption fees, around $300-500. Make sure you know costs upfront.


  1. Sign transfer paperwork: Once approved, you and new borrower will sign loan assumption agreement transferring legal liability.


  1. Transfer registration and insurance: New owner must register the car in their name and get appropriate auto insurance.


So in summary – loan transfers are possible but not guaranteed. Work closely with your lender and have backup plan if request is denied.

Here are the typical requirements lenders have for transferring auto loans in Canada:


– Loan must be in good standing – all payments made on time

– New borrower meets credit score and debt-to-income criteria

– New borrower provides proof of income, usually recent pay stubs

– Fees paid – assumption fee, processing fee, title transfer fee

– Car inspection may be required to confirm condition

– Minimum time met – 12-24 months of original loan term

– Loan-to-value caps if car valued less than remaining loan balance


So the new borrower needs to demonstrate creditworthiness and ability to manage the remaining loan payments. Having a strong application will increase chances of getting approved.


Yes, it is often easier to transfer or assume a car loan with a spouse or family member in Canada. Here is what you need to know:


– Spouse will still need to apply and get approved to take over loan

– Lender may waive assumption fees for spouses

– Income and assets may be combined to meet eligibility

– Title and registration will need to be changed into spouse’s name


Before starting, check if you have a clause permitting transfers to immediate family. Provide any required documentation for proof of relationship. While not guaranteed, lenders tend to be more flexible with family transfer requests.

When transferring a car loan in Canada, have these documents ready for both current and new borrower:


– Proof of insurance

– Driver’s license

– Recent pay stubs

– Bank statements

– Tax returns

– Completed loan assumption application

– Signed loan transfer agreement

– Completed vehicle registration form


You’ll also need the original bill of sale, loan agreement, and vehicle title if liened. Make sure all paperwork is fully signed and completed accurately to avoid delays. Both parties should retain copies after finalization.

Unfortunately most auto lenders do not allow non-spouses to be added to a car loan. However, here are a couple options:


  1. Refinance: Take out a new joint loan with the other person as co-borrower, using funds to pay off existing loan


  1. Co-signer: Keep loan in your name only, but have other person sign as guarantor making them equally liable


Before pursuing, ask your lender if they allow for any exceptions. Typically need to demonstrate financial benefit for the lender to agree to altering existing loan. Consider pros and cons first.

While transferring a car loan can provide relief, there are a few key risks to consider:


– New borrower defaults – you remain equally liable

– Loan assumption denied – stuck with continuing payments

– Fees and finance charges add to loan balance

– Negative impact on your credit score

– Complications with registration and insurance

– Disputes over condition of vehicle


To mitigate risks, ensure new borrower is fully vetted and qualified before starting transfer. Review all paperwork thoroughly and get assurances from lender of approval before finalizing.

Yes, it is possible to transfer or sell a car in Canada before the loan is fully paid off. Your options include:


  1. Loan Assumption – Transfer loan balance directly to new owner


  1. Pay Off Loan – You pay loan in full first, then sell car outright


  1. Private Sale – Sell car and use funds to settle remaining loan


No matter what, communicate with lender early in the process to understand requirements. Fees often apply too. Ensure no issues with registration and insurance changeover.

When you sell a car in Canada with an outstanding auto loan, legally the loan must be paid out first before transferring ownership. Here is the typical process:


  1. Buyer arranges financing to pay off your loan balance
  2. Loan payout statement prepared by lender
  3. Buyer pays loan balance directly to lender
  4. Lender sends lien release to government
  5. You provide ownership documents to new buyer
  6. New registration and insurance completed


So you cannot just transfer ownership without the outstanding loan being addressed. Make sure loan is fully paid before signing over the car.


For the most part, dealerships are not obligated to accept a return once a financed sale is complete. However, here are some cases where a return could be possible:


– Car is defective – Covered under lemon laws

– Dealership made misleading claims – Grounds for lawsuit

– Hardship return clause exists in contract – Very rare


Outside of those limited situations, you would need to pay the loan balance first before voluntarily returning the car to a dealership in Canada. So don’t count on being able to change your mind later on.


No, a car loan currently in default almost certainly cannot be transferred to another person in Canada. Here’s why:


– Lender has already deemed you too high risk

– Negative marks already on your credit bureau

– Vehicle may have lien or be in line for repossession

– No incentive for lender to facilitate transfer


Focus first on bringing loan out of default by catching up on late payments before attempting to transfer responsibility to someone else. In some cases, repossession may already be inevitable.

If the primary borrower on a co-signed car loan in Canada dies, here is what would happen:


– The co-signer becomes responsible for making the remaining loan payments

– The vehicle title transfers into the co-signer’s name

– Loan stays as is, with same balance, interest rate and term

– Vehicle ownership and registration must get updated


The lender will typically work with the co-signer on the required paperwork for the transition. Make sure to review the loan terms specifically as policies can vary.

Borrowers looking to remove a co-signer typically have two options:


  1. Refinance: Apply for a new loan in your name only to pay out existing balance.


  1. Co-signer release: Request lender remove co-signer after making 12-24 months of on-time payments.


Start by checking your loan contract for any clauses regarding co-signer releases or early refinancing. Approval is based on you now meeting full underwriting criteria on your own. Fees often apply too.

Paying off your car loan faster can save you a lot of money on interest charges. That said, weigh the following pros and cons:



– Save on total interest fees

– Own car free and clear sooner

– Build equity faster in the vehicle

– Frees up cash flow going forward



– Prepayment penalties may apply

– Missing chance to invest money instead

– Lose tax deductibility of loan interest


Run the numbers to see if accelerated payments make sense for your financial situation in Canada. An early settlement calculator can forecast the potential interest savings.


If the primary lessee on a car in Canada dies mid-lease, the typical process would be:


  1. Leasing company contacts next-of-kin on options
  2. Car returned and lease terminated early
  3. Early termination fee and remaining payments due
  4. Vehicle sold at auction after reconditioning
  5. Estate settles outstanding lease balance


Review your lease contract for specifics as some waive fees if lessee passes away. Confirm process with leasing company as soon as possible and ensure payments remain up-to-date in interim.

Breaking a car lease in Canada is allowed but very expensive. Options for early exit include:


  1. Lease Takeover – Transfer to someone assuming your lease
  2. Lease Swap – Get new lease for different car
  3. Buy Out Lease – Purchase car outright
  4. Voluntary Termination – Return car and pay all fees


Fees for early termination typically include: remaining monthly payments, early end charges, wear-and-tear and mileage overage, any taxes, plus disposition or administration fees.

Once a leased car gets turned in at the end of term in Canada, here are the next steps:


  1. Vehicle gets appraised and inspected at return facility
  2. Any excess wear-and-tear or mileage charges gets applied
  3. Car gets sent to auction and sold by leasing company
  4. Final lease-end paperwork sent with any last bills or credits
  5. Lease closure reported to credit bureaus


Make sure you have documentation showing return inspection results and sale value. Save records for taxes and accounting purposes until past audit periods expire.


Yes, you may be able to negotiate the residual buyout price when your car lease ends in Canada:


– Compare market value to your contracted residual

– If market value is lower, make case for adjusted buyout

– Extend lease temporarily to renegotiate better price

– Offer to upgrade vehicle to get dealer incentives

– Note issues impacting salability if much higher mileage


Success depends on wholesale market demand for that vehicle model and configuration – do your research. Hire a broker to negotiate on your behalf if needed.

Expect to pay the following typical fees if transferring or assuming a car lease in Canada:


– Assignment fee – $200-500 to process paperwork

– Disposition fee – $300-600 charged by leasing company

– Sales tax on any lease payments made in advance

– Title and registration change fees

– Any new upfront deposits required


Review your lease contract for specifics on fees allowed. Keep documentation on exact charges for the new lessee taking over payments.

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