Can You Transfer Car Finance To Another Person?

Car finance is sometimes challenging to understand, especially with the additional option to transfer the binding to another person. Once the loan becomes an unbearable financial burden, a change of circumstances occurs, or you simply wish to exchange the car, it is essential to understand the feasible transfer process. 

In this article, I answer, “Can you transfer car finance to another person?”: I describe the two principal mechanisms, the key considerations, and the four steps in transferring car finance so that the individual would be fully equipped to transfer their financial binding to another person.

Understanding Car Transfer

Car finance transfer is passing the obligation for a car loan to another person. In some cases, this option can be beneficial, for example, when you sell a car that is still financed with a loan or must continue paying for another person’s car. Nevertheless, this is a complex process involving several steps and prescriptions, and it is crucial to know them to secure an efficient transfer.

Can You Transfer Car Finance To Another Person?

Yes, you can transfer car finance to another person. Car loan transfer entails the following main steps:

  • Check the loan agreement

It is essential to check your loan agreement first. Many times, lenders include information on whether the car loan can be transferred to another party. Some may state explicitly that they are non transferable, while others may be assigned under certain limitations.

  • Find a transferee

Find someone to transfer the loan to. It could be the person buying the car from you or someone who needs a car loan. Ensure the transferee is clearly made aware that they will have to pay the remaining loan amount.

  • Qualify the transferee

Many times, the new borrower is asked to apply for the loan to confirm their qualification. This may include a credit check and other financial checks to determine their ability to pay the loan.

  • Contact the lender

After finding the transferee, contact the original lender to inquire about transferring the loan. They will provide further information and provide the necessary paperwork for the transfer. The procedures may differ from one lender to the other.

  • Complete the transfer paperwork.

The transferor, current loan holder, and transferee, new loan holder, should fill and sign any paperwork allowing the transfer.

  • Transfer fees

Some lenders may also charge a specific charge for transferring the loan. The fee may be contained in the loan agreement or explained to you by the lender.

  • Update registration and insurance

Ensure the car’s registration and insurance are switched to the new owner and loan holder.

  • Risks and responsibilities

If the debtor defaults, the loan holder may still have some liabilities. The new owner must take measures to ensure these do not happen.

Why Can’t You Simply Transfer Car Finance?

These are some of the main reasons why lenders are reluctant to approve a direct car finance transfer:

  • Credit risk: The lender approved the loan after assessing your financial state. That other person may have a lower credit score or income, making it much more likely for you to miss the payment.
  • Ownership and liability: As stated before, car finance presumes the creation of a lien. In other words, until you fully pay off the loan, the lender is the legal owner of the car. Therefore, transferring the finance without transferring the actual title creates a murky situation that seriously complicates potential repossession.
  • Insurance matters: Typically, insurance is written to reflect your loan agreement. If you change the borrower, a new insurance policy will have to be written, which means your rates might change or your coverage might differ in unexpected ways.

Alternative Solutions

While a direct transfer is not possible, there are several alternatives in your specific situation:

  • Selling the car and paying off the loan: In the most straightforward scenario, you sell the car you own to someone else. The buyer then uses their collected money to pay the outstanding amount to your lender, who grants them the title free and clear. 

Pros: simple and direct process. The lender gets the total amount, reducing the risk. 

Cons: this strategy will only work if you can find a buyer willing to purchase a car with existing finance, and he may need to be persuaded to make a deal below the market value, as he would have to pay off the loan.

  • Refinance the loan with a co-signer: If you cannot make payments but want to keep the car, a co-signer allows you to refinance your loan. This means that you and a co-signer are equally responsible for the debt, and a co-signer’s good record may mean a lower interest rate. 

Pros: The co-signer is responsible for the loan. 

Cons: it might be challenging to find someone to absorb the risk. Missed payments will affect both your and your co-signer’s credit scores.

  • Sell to a dealership: many dealerships offer their buying program for financed cars. They pay off the loan directly from your lender and receive the title. The difference between your car payment amount and the value of the vehicle you paid for is the cash you get. 

Pros: you do not have to find a buyer. 

Cons: you are likely to get less from your car than through other means.

  • Give back the car: if you cannot make payments and cannot and do not want to sell the car, returning it is another possible scenario.

Pros: You will be able to negotiate with your lender as per finance terms. 

Cons: your credit history will worsen. You may have to pay the deficiency balance.


The question “Can you transfer car finance to another person?” is relevant. However, the answer is dependent on several factors, which include the nature of the finance, your agreement, and the lender’s policies. 

It is recommended that this process be approached with a lot of caution due to the financial implications and the requirements involved. Due diligence of your options in this regard and close collaboration with the lender will allow for a smoother transfer process, which means that all parties will benefit.

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