You are at the end of your Latin: you bought an expensive car when you made a lot of money, but six months ago you lost your job and are now far behind your car loan payments. A relative offers to cover your car payments while you catch up. Or maybe you have a friend with really terrible credit, but good income and a car are waiting in your driveway to use some more. You want him to cover the costs of your car payments in exchange for letting him drive the car.
In all these cases, you may be wondering: can someone take over my car loan?
The Short and Sad by It
Some banks will confirm this, while others might work with the old and the new owners to sort something out. In the latter case, the new payer of car payments, so to speak, would still have to go through all of the hoops as if they were getting the car loan in their own name from the start.
Let them drive It, Too
It’s one thing to let a friend or family member cover your payments for a few months while you’re on the right foot – you can probably achieve this without too much trouble. But what if you are interested in having someone else behind the wheel of your vehicle too?
Entrusting your vehicle, and all of the costs and maintenance associated with it, to a stranger is a pretty risky business.
Even if you sell your vehicle to the other person instead of just drafting an agreement to let them drive the vehicle and cover the payments on the loan, if you have a car loan, you are not the only one Vehicle Owner: You need to get permission from your lender before you sell your car. However, you will still likely come ahead if you sell the car yourself instead of hiring out your overdue payments and getting your car rental back. Remember: defaulting on your loan or getting your car taken back is not just a hassle for you and your credit score – it’s a hassle for the lender and you have to chase it down! 99 times out of a hundred, the lender would rather discuss alternative payment options than that you default on your loan.
Can’t you just ignore the Bank and Go Rogue?
You could just form a gentlemen’s (or gentlewoman’s) agreement with someone and let them drive the car if they agree to pay you regularly and you will still make the payments on the vehicle with their money. But what happens if they do not pay?
In essence, you will get a repo man for your own car, not a force of law to back you up. If the driver is in an accident and they are not listed as one of the authorized drivers on your policy, you can get out for a lot of money if they are in a serious accident. You will also be responsible for unpaid parking tickets and tolls that they can rack in your vehicle.
How to Sign More than your loan to another person the right way
If you decide to continue with your plan to take someone else over your car loan, there are several steps you need to take:
Read the fine print of the loan
It is important to be armed with the facts before you ever sit across the table from a formidable banker or loan adviser. Read your loan agreement. Read it again. Maybe consult a reliable legal adviser who specializes in contract law. It can be easier in most cases to sell your car or exchange it for a cheaper vehicle and set the loan to a manageable size payment.
Find out the potential new Tenant Credit Score
It is crucial that you know what you are working with before you contact your financial institution. A credit score is the most crucial factor that financial institutions use to determine someone’s financial risks and creditworthiness for good reason – this is the best tool at their disposal to find out is the chance that they will ever have the money that she borrowed it from the other person to get it back. If the new potential tenant has bad credit, it’s going to be a difficult sell to your bank.
Contact your banker
The person whose name is currently on the car loan must contact their bank or other financial institution before anything else can happen. Questions about the policy on automatic loan transfers. This is the step where most banks will tell you that it is against your contract to do this. If this is the case, ask about the refinancing of the auto loan in the name of the person concerned.
Wait for loan approval
If you are incredibly lucky, your bank or other lenders will let you apply for loan approval. This can take anywhere from a few minutes while you wait in the office for a few weeks.
If the loan takeover has been approved, you can continue with the following steps. If not, you will be back.
Draw the papers!
If your loan acquisition agreement is approved, you will need a lot to sign a document. This includes forms to over-sign the collateral and title of the car in most cases. You also need to remove the vehicle from your own auto insurance policy. You may need to contact the DMV for help with the title and registration transfer policy. The new car owner will have to take car insurance based on their own state requirements.