If you have a car loan over your head and you want to sell the car, though it’s tough it’s not impossible. The most preferred option is to close your loan account by prepaying the loan and then sell the car. But if you are unable to repay the loan, there is an option to transfer the loan to the next person. To be able to transfer your car loan to somebody else, you need to surrender the ownership of the vehicle to them as well. Banks might allow you to take the burden of a car loan off your shoulders by handing it over to someone else, provided you meet their requirements. Whatever be the reason for selling the car, you can transfer the loan using the process given below.
The process of transferring your car loan entails the following:
Your loan documents will clearly state if it is possible to transfer your loan to another person. If you are unable to find this information, you can contact your bank and get clarification on the options of transfer and the process. If your bank has specifically mentioned that the loan is not transferrable, then it will be extremely difficult if not impossible to transfer it.
You will need to find a person who is willing to take on the loan and the ownership of your vehicle. Unless you make a good offer, people might generally not be interested in taking up a loan halfway through. Do your research on the used car rates and do your calculations to estimate a good price to sell your car. The fact that you are selling the loan along with the car will bring down the price of the vehicle. But this depends on how much of the loan is left for the new owner to handle.
The person who will be taking over your loan should have the same or better credit standing as you. This person should preferably not have defaulted on any loan previously. He should have a steady source of income and a good credit score depicting clear repayment history of any prior loans or credit card debts. The new borrower will have to submit KYC documents required by the banks.
If you are unable to find a suitable buyer to transfer the loan, you can contact a car dealership. These dealerships have contacts related to purchasing used vehicles and it might be easier finding a buyer through the car dealer.
Transferring the loan documents is not the only concern in this process. You will need to transfer the registration of the car as well. To do this, you need to visit the closest Regional Transportation Office (RTO). The RTO authorities will transfer the ownership of the vehicle to the new owner. Processing this request will take up to two weeks. The authorities will have to do a background check with the bank before they change the name in the Registration Certificate. There may be charges applicable for this.
The new borrower will also have to fit the insurance requirements. You will need to check with the car insurance provider to get consent on transferring the insurance policy as well. Submit the bank documents to the insurance provider and they will make the changes. This will ensure that you don’t get charged for premiums you don’t have to pay. The new owner of the car will have to bear the car insurance premiums.
The new borrower will have to submit the following documentation.
The bank may request for more documentation as they may deem fit.
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. You need to check with your lender to find out the charges related to the transfer process.
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