Introduction
Transferring a loan to another bank is easier. At any given point in time, if you have decided that your interest rates are not favorable to your financial situation and have been soaring, you can always apply for a balance transfer at much more affordable interest rates with a new lender. Several banks will be more than happy to assist you with your requirements. But what is a car loan transfer?
If you are planning to sell your car but haven’t completed paying your loan yet, the process is different. So, how does it work? Is it impossible or does the car loan transfer have a process?
In this blog, we are going to discuss the possibility of transferring your loan to a new owner. If you are not sure how to keep reading!
How Does Car Loan Transfer Work?
Car loan transfer is a process if transfering your on-going loan amount to the new owner of the car. The process is not easy, but not impossible.
You have a car that you have been using for a while, but for some reason you are planning to sell your used car while your loan on your car is still in contract. And, if you are planning to transfer an auto loan, the process needs a bit of work before you take a swing at your luck.
“In most cases, car loans are not assumable. When the registration and title are transferred to a new owner, the lender needs to be notified. The lender will then step in and require a credit check to make sure the new owner can make the payments. This leads to the initiation of a new loan at the new owner’s credit level.”
Former Edmunds.com Senior Consumer Advice Editor Philip Reed (Source credit.com)
Let us decipher what Mr. Reed said. To be able to transfer your auto loan to a new owner, you will need to hand over your ownership of your vehicle to the person as well. Assuming to meet the requirements, the lender may provide you with the documentation to proceed further. This may include:
Terms And Conditions
First and foremost, know your lender. Check if there is any statement on the loan agreement describing the nature of the loan and the car loan transfer process. If not, contact the bank or the lender on their process. And if your bank has rejected your request for the transfer of the loan, ask them the reason for refusal and correct the issues to resend the funds, else it will become extremely difficult to transfer.
Checking in with the new owner
Make sure the new owner meets all requirements of the bank as you did when you first took the loan. The new owner should have a good CIBIL score, and credit history, and meet the repayment capabilities of the bank. Not only should they be eligible for the loan, but should provide all the required documents to the lender to transfer the ownership.
An alternative
As discussed before, if your lender is not flexible with your car loan transfer, ask your lender about the payoff details and get a car dealer who is likely to sell your car at a reasonable estimated value. Get the lender involved in the sales process and pay the outstanding amount on the loan, and transfer the title to the new owner of the car.
Transferring the title to the new owner
Whether you are transferring the loan documents or putting the car on the display, the borrower should be transferred the authority of the car in full, i.e with complete ownership of the vehicle including registration. Visit the nearest RTO, speak to the concerned authority, and submit the requested documents. Once you have submitted the required documents, the processing may take from 2 to 3 weeks while the background check is carried out by the officials.
Once the documents have passed the credibility check, the name on the registration certificate will be changed. Remember to discuss the charges applied in the process to keep in the loop with your finances.
Standard insurance qualifications
Everything includes transferring the insurance policy to the new owner. Check with the car insurance provider and inform them about the ownership transfer to request approvals. Submitting the bank documents to the provider will ensure a cease on your premiums upon ownership surrender. This will reduce the unnecessary burden on unwanted finances.
Ask for processing fees and hidden charges
This is important if you want to avoid any last-minute headaches. Ask the bank about their processing fees or hidden charges that may apply to you in the process of the loan transfer.
Keep your documents safe
Ask the new owner the copies of documents provided in the process of car loan transfer. To further reduce the concerns that may arise in the future, it is best to keep a track of your documents and proofs that involve the ownership transfer as evidence that you are no longer the owner of the vehicle and you no longer have any bearing. (Such as NOC certificate, etc)
Check out our car loan documents checklist guide to know which documents you should prepare beforehand.
The Bottom Line
Most banks support the car loan transfer, but even if your bank doesn’t provide flexibility, there is always an alternative. Even if the process is a bit tiring, at the end of the day, there might be several reasons why you would want to transfer a loan.
So it is advisable to check in with your lender and let them know your decision on transferring the loan and talk about the alternatives if needed. You can also call our representative at Blue Carz to schedule a call and discuss the details of your car loan transfer. We will be happy to assist you with the information required throughout the process.
Up Next – Read our blog “5 Essential Car Selling Tips For Smart Sellers” to sell your car smartly!
