Vehicles are expensive. For many people, a car or truck is the biggest purchase they’ll ever make other than a home. And monthly car payments reflect that fact.
As the price of cars rises, those monthly payments are getting higher. In fact, around 15% of people who financed a new car — and 5% of people who financed a used car — in the latter part of 2022 are paying $1,000 or more per month on those loans. So, it’s no surprise some individuals are struggling to make their car loan payments every month.
Whether you ended up with a larger payment than you planned or a drop in income is making your vehicle loan hard to keep up with, you aren’t alone. And you do have options. Find out how you can shed the responsibility of a car payment by using the tips below to transfer the car loan to another person.
In This Piece
- Can Someone Take Over My Car Payments?
- How to Transfer a Car Loan to Another Person
- How Does Transferring a Car Loan Affect Credit Scores?
- Other Options Instead of Transferring a Car Loan
Can Someone Take Over My Car Payments?
It’s unlikely that someone can simply step in and take over your car payments as the new owner of a vehicle. In most cases, car loans aren’t transferable. That means you can’t simply sign the loan over to someone else and call it done.
In theory, you could let someone drive your car and make the payments. However, the car—and the responsibility for it—still belongs to you. You might need to keep insurance on it, and if the person doesn’t pay the loan payments as you agreed, the fallout happens on your credit report, not theirs. In potentially rare cases, your car loan might be transferable. Check your loan contract to find out if this is the case.
How to Transfer a Car Loan to Another Person
What happens in those cases where a car loan is transferable? If you want to pass your car and loan along to someone else, you must do so by working through your lender. The potential new loan holder must fill out an application with your lender and meet criteria before you sign your title over.
The steps to transfer a car loan to another person will vary slightly depending on the lender. However, you can expect a process similar to the one described below.
- Determine whether your loan contract allows for the loan to be assumed by or transferred to someone else. Start with your contract, but you can also call your lender to find out.
- Get next steps from your lender for the process, if it’s allowed. Ask about fees associated with a car loan transfer, and make sure you know exactly what the assumption criteria are for new loan holders.
- Have the new loan holder follow the required steps to apply for a car loan with the lender. If the individual desires to take over the payments with similar rates and terms, they’ll need to meet the required creditworthiness for the loan.
- After the new loan holder is approved, the title can be modified. Your lender may help with this process, or you may need to go to your state’s Department of Motor Vehicles to have the title transferred. Be sure to transfer the title as soon as possible to avoid the potential for future liability.
- Don’t forget that the new loan holder will need to show proof of auto insurance.
How Does Transferring a Car Loan Affect Credit Scores?
When you transfer your car loan, you technically close that account. It gets reported to the credit bureaus as a closed account, which can impact your credit. Specifically, it changes both your credit mix and credit age—both factors in how your credit score is calculated. Because of this, you might see a temporary drop in your credit score when closing an account.
The impact can be even more serious if you fall behind on your car payments before you transfer the loan. Payment history is the biggest factor in your credit score. So, falling behind by a month or more on your auto loan can cause a substantial drop in your score.
Other Options Instead of Transferring a Car Loan
Transferring a car loan can be difficult and isn’t always possible. Whether you want to keep your vehicle or simply need a more practical way out of the loan, there are other options.
In some situations, it’s the loan and not the car that’s unaffordable. For example, say you originally applied for the car loan when you only had fair credit. Now you have good credit and might qualify for better rates and terms, which could lower your monthly payment.
In this case, refinancing your loan so it better fits your budget might be an option. Compare refinancing options now.
Sell Your Vehicle
Another way to shed the financial burden associated with your car or truck is to sell it. If you can sell the vehicle for more than you owe on it, you might even end up with some extra cash in your pocket.
If you fail to make your vehicle loan payments long enough, the bank will repossess the car. That means it takes the vehicle and sells it to try to recoup its losses. Before you get to this point, though, you have a series of late payments tanking your credit.
In cases where you know you’re unable to catch up on payments, you might talk to your lender proactively. You can voluntarily surrender the vehicle to avoid the unpleasant forced repossession process. However, this still shows up on your credit report as a serious negative mark. And if the lender can’t sell the vehicle for what you owe, you might have to pay the difference.
Refinance With a Cosigner
Another way to keep your car while also making the loan payments more affordable is to refinance the loan with a cosigner. If the cosigner has good or excellent credit, you might get a lower interest rate and/or longer terms—both of which can reduce your monthly payment.
Can a Cosigner Take Over a Car Loan?
If you don’t pay the loan as agreed, the lender looks to the cosigner to make good on the loan. However, the cosigner can’t just decide they want to be the primary borrower, take over the loan and take ownership of the car. They’d still have to go through proper processes with the lender to refinance or transfer the loan, and you’d need to be involved.
You generally can’t slide your auto loan booklet over to a friend and assume the matter is handled. However, if you can’t pay your monthly car payment, you may have some options. Research those options and speak to your lender as soon as possible to avoid potential financial hardship.
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