Having a car loan weighing you down can be intimidating, especially if you want to sell the car and hand over the car loan to the new buyer. Although tough, it is something that could be done. The best option is to prepay the car loan, close your loan account, and then sell the car. However, not everybody can stretch their budget and pay back the loan. In this case, you could consider transferring the car loan and surrendering its ownership to the new buyer of the car at the same time. Generally, there are two ways to transfer a car loan to another person (1) seeking a new lender or (2) modifying with your existing lender.

Option #1: Seek a New Lender

This option will most likely end up costing you a bit more, but the new car owner will probably see more benefits. The idea is that you find a new lender, who will issue a loan to their name to repay the remaining sum on your loan. Note that the new loan would count as prepayment to you, which may lead to financial penalties and credit score issues for you. The new borrower, though, will most likely be in a more advantageous position because the remaining sum will be smaller than the initial principal. This means that the new, smaller loan will have lower interest rates and lower monthly payments, among other things.

Now, depending on which bank you choose to do business with, you may be allowed to sell the car and hand over the car loan to the new buyer. You need to meet some requirements, which vary per bank so make sure you check with them first. No matter the reason you want to sell the car, you can transfer the loan using the process mentioned right below:

Step# 1: Check your loan documents

Go through your loan documents to see whether you can transfer your car loan to another person. Although such details are usually mentioned in the loan agreement, you could also contact your bank and ask them for clarification regarding this matter, as well as the required process to make the transfer. If you get a negative response by the bank (the loan is not transferable), it will be best not to try to push it any further and just go to alternative option #2.

Step #2: Find a new borrower

You need to come up with a good offer so another person will consider taking on the loan and the ownership of your car. To be able to come forward with an enticing offer, first do some research on the rates of used cars and then estimate a good price to sell your car. Remember that the fact that you want to sell the car along with the loan will bring the price of the vehicle down. However, the final price will be determined by the amount of loan left for the new owner to deal with.

If you are unable to find a good candidate to transfer the loan, the next best thing to do is contact a car dealership and ask them if they have a contract related to buying used cars. Most dealerships do, so it will probably be a tad easier for you to find a suitable buyer through them.

Step #3: Apply for a refinance loan

Loan transfers can only be done if the recipient of the transfer agrees to refinance the car and sign their name to the new car loan (more details about how to refinance your car loan and save money right below). Given that the credit of the recipient mainly affects the rate of the loans available, it is crucial to check the credibility of the potential borrower before moving forward with any other steps of this process. They should have, at least, the same credit as you (if not better) and (preferably) not have failed to repay a loan (any loan) in the past. It is also critical that they have a good credit score that shows clear repayment history of previous credit card debts or loans. Having a steady source of income can be a good sign too.

Although you may think that this is not of importance to you, considering that the new interest rate will be paid by the transfer partner, it still is paramount that they have a good credit, especially if you plan on refinancing again and buying the vehicle back at a later date.

Step #4: Modify the car title

Once your transfer partner signs the refinance loan, the loan will be transferred to a different name. This is why it is important that the title of the car reflects the new owner, unless you have made a different deal with the new borrower and you get to keep the car’s ownership. So, find the nearest DNV and visit the location (both you and the new borrower) with valid IDs. Finally, you will also be required to write up a bill of sale.

Step #5: Get car insurance

The new owner of the car will need car insurance if they are planning on driving the vehicle. To make sure everything checks out nicely, call your current insurance company, cancel the existing policy, and have the new owner apply for insurance (the car is under their name now, remember?). But, if you intend to drive the car, it is important that your name is also added to the policy as a driver.

When the loan is transferred in its entirely, it will appear as if you have never taken out a car loan. The new borrower will be responsible for the entire balance while you will receive a good standing of your loan.

Alternative Option #2: Modify Directly With Your Existing Lender

Sometimes, this may not be the best deal for the new borrower; nevertheless, it is an option with the least penalties to you. In this case, you contact the lender directly and let them know of your intention to sell the car. Also inform them that you would like the car loan to go with the car, which is actually what happens when you trade in a vehicle to a dealership prior to paying back the loan. Note that you will need to prove that the new borrower is credit worthy (same requirements as above).

A Cost-Effective Way to Refinance a Car Loan

Compared to refinancing a mortgage, this one is far easier and can save you 1000s of bucks in interest. Plus, you may be able to pay off your car loan faster. Refinancing your car loan is a good option if the interest rates have dropped since you purchased your vehicle or when your credit score has improved, which will allow you to get a better rate. It is best to refrain from using a dealership to get your car financed because the rates are often higher through them (unless you have no other option available).

Next step is to determine whether your car qualifies for refinancing by asking your bank about any conditions that need to be met. For example, some banks rule out certain car makes while others require the vehicle has a salvage title or that the current loan is less than $7,500 remaining.


  • Compare interest rates for used cars by either calling banks in your area or finding the national averages at websites like bankrate.
  • Use an online auto loan calculator to estimate how much a refinance you’ll need.
  • Apply for a car refinance loan. You will be called to pay a small fee to cover the re-registry of the car and title transfer costs – some banks also require a processing fee on top of that.
  • Finalise the loan only when you are okay with everything and don’t forget to say no to cash out refinance offers, where you are offered refinancing for more than the owned amount so you can have the difference in cash. Such offers add to the cost and length of your loan. Plus, your car will lose value quickly.

By the way… It is not uncommon that a bank refuses to refinance an auto loan that is from another bank.

Frequently-Asked Questions

Q: Can I transfer a personal loan directly to a business loan?

A: Business auto loans and personal auto loans have a different structure. It is not too common to transfer a personal loan directly to a business loan, considering that business auto loans usually involve multiple vehicles and also tend to be larger than personal auto loans. But, it may be possible to prepay your current loan and then refinance the business loan. The only way a direct transfer can be carried out is if the current business auto loan and your personal loan are with the same lender.


Q: What about the insurance if the new borrower is an out-of-state driver or family member?

A: If you loan a car to a driver out of your state, your car insurance, title, and registration will be valid. If you are passing the car to a relative (i.e. child), who will remain under your insurance plan (hence, be covered in the case of an accident), you may not need to worry about insurance. However, to avoid higher insurance payments, it is best to list the new owner on the insurance policy, especially if the new owner is a new driver or under 25 years of age. When you do that, you should declare what purpose the car will be used for and where it will be driven. Also make sure your child’s name is added to the car title so that police officers know the car is not stolen if they ask the driver to pull over.


Q: What documents will I need to refinance a car loan?

A: The documents you will need to refinance are (usually) (1) a copy of your current loan papers and (2) your car’s current mileage, VIN, and other such information about your car. Before you do anything with a new loan, you also need to know exactly where you stand with your current loan, meaning know how much you are paying in interest, the current payoff amount, how many months are left on the loan, and whether there is a penalty of you pre-pay the loan.


Q: Can I sell my car if I have a car title loan?

A: Selling a car that has a title loan is difficult because you do need a vehicle with a clean title to be able to sell it. However, you could trade it with a dealer even without having to buy one of their cars (there are dealers that buy used cars and then either sell them to auction or on the lot). Before you take another step, first find the factory invoice price of the vehicle on sites like TrueCar and figure out the amount the dealer holds back (here is a handy list to consider checking out).