• How to Transfer a Car Loan to Another Person?

    Do you want to sell your car while your car loan is still active? Though it is tough, it is not impossible. The most preferred option is to close your loan account by settling the loan in advance and then selling 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 by following the process mentioned below:

    Car Loan Transfer Process

    1. Check your Loan Agreement

      2. 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 to transfer it.

    2. Finding a Suitable New Borrower

      3. 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.

    3. Checking the Borrower’s Credibility

      4. The person who will be taking over your loan should have the same or better credit standing as you. 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 the relevant documents to the lender.

    4. Checking Car Dealerships

      5. 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.

    5. Transferring the Car Registration

      6. 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). Processing this request may 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.

    6. Insurance Requirements

      7. 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 have to pay the premiums for an insurance policy that you are not using. The new owner of the car will have to bear the car insurance premiums.

    7. Submitting Documents

      8. The new borrower will have to submit the following documentation.

      • A form requesting the transfer of the loan to their name
      • ID proof
      • Address proof
      • Income proof

      The bank may request for more documentation as per their requirement.

    8. Fees and Charges

      9. Banks may levy processing fees and transfer fees to change 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.

    Tips

    • First seek out the approval of your bank to transfer the loan before you venture into the loan transfer process.
    • Find a suitable buyer or check with car dealerships.
    • Check with the RTO and insurance provider only after you have got consent from your lender that the transfer is possible.
    • Ensure that the ownership of the car has been transferred.
    • Ensure that the insurance policy is transferred.
    • If there is any damage to the car during the transfer process, you will be responsible for it.
    • Make sure keep the car protected and safe till the transfer is made.
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    FAQs

    1. What is the process that is followed by the bank once I apply for a car loan?

      2. Once you have submitted the relevant documents, the below-mentioned steps are followed by the bank:

      • Processing and approval of the loan
      • Documentation process
      • Loan sanctioning
      • Disbursement of the loan
    2. Is it possible to prepay or foreclose the car loan?

      3. Yes, it is possible to prepay or foreclose the car loan. However, a certain charge is levied by the bank in the case of foreclosure. The below-mentioned documents must be submitted in order to foreclose the loan:

      • Pre-payment statement
      • Bank statement showing the previous instalment has been paid
      • RC copy
      • Mode of payment must be made via DD, cheque, or cash
      • The request letter that has been signed by the applicant
      • PAN Card
      • Insurance copy of the vehicle
    3. After how long can I foreclose the loan?

      4. Depending on the bank, the period after which the loan can be foreclosed will vary. Usually, banks allow you to foreclose the loan after six months.

    4. How can I apply for a car loan?

      5. The below-mentioned individuals can avail a car loan:

      • Salaried individuals who are between the ages of 21 years and 58 years.
      • LLPs and Partnership Firms
      • Trusts and HUFs
      • Self-employed individuals who are between the ages of 21 years and 65 years.
      • Public and Private Ltd. companies
    5. Is the rate of interest floating or fixed?

      6. Usually, banks offer car loans where the interest rates are fixed.

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