Can I transfer my car loan to someone else?
While you probably didn’t anticipate having to sell your car before the end of your loan term, plenty can change over the course of a few years. This might lead you to wonder whether you can transfer your car loan to another person.
While it is possible to sell your car when it’s still under finance, it’s unlikely that your credit provider will allow you to transfer your loan to someone else.
The reason for which is fairly simple. Banks and other lenders are required to comply with ASIC’s responsible lending conduct obligations, which state that credit licensees must not enter into a credit contract with a consumer if it is unsuitable for the consumer.
Before a lender approves a loan application, they will determine whether the borrow amount, interest rate, repayment costs, loan term, and other factors, are appropriate for the borrower’s personal financial situation.
If the lender was to allow you to simply transfer your car loan into someone else’s name, they would be failing to meet their obligation to carefully assess the individual’s financial position and determine whether the loan would be suitable for them.
After all, the loan product that’s best for your financial circumstances isn’t necessarily going to be right for someone else.
Fortunately, there are other options.
How can I sell my car before I pay off my loan?
If you need to sell your financed car before the end of its loan term, you will generally have the following two options:
- Use your savings to repay the balance owing and then sell the car to recoup the costs, or;
- List the car for sale and have the buyer pay off the loan balance upon transfer of ownership.
If you are able to dip into your savings and pay off your loan before listing your car for sale, you may find it easier to attract serious buyers as it will no longer be encumbered. This option can also make the sale transaction easier, as the buyer can simply make the payment directly to you.
If you are not in the position to be able to pay out the loan before selling your car, you could use the money you make from the sale to pay it off. Just ensure that you are transparent with potential buyers when selling a car that’s under finance.
Many credit providers will allow you to process the transaction in the branch, so that the buyer can be present to witness the loan being paid off before ownership is transferred into their name.
If you sell the car for more than what is owing on the loan, you can expect to receive what’s remaining once any fees have been covered. On the other hand, if you sell the car for less, you’ll be liable to pay the gap.
And if the buyer plans to use a car loan to buy the car, their credit provider should be able to communicate directly with your credit provider in order to work through the transaction process.
Whichever option you choose, keep in mind that you may be charged early repayment and exit fees for paying off your loan before the end of its term.
Disclaimer
This article is over two years old, last updated on July 31, 2021. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent car loans articles.
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