Taking Over an Auto Loan

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Interested in taking over an auto loan, or having someone take over your car loan? We've got the information you need—including whether or not it's even possible.

Can People Take Over Car Loans?

Taking over auto loans can be tricky business, and largely depends on the bank or other financing company from which the original owner obtained the loan.

We explain the basic steps on how to take over a car loan below, but your first step must be to go over all of your auto loan documents as well as contact your lender directly and ask about the policy regarding taking over loans.

Why Take Over an Auto Loan?

Reasons to take over an auto loan vary by person. Generally:

  • The original owner wants to move the vehicle but isn't, for whatever reason, interested in privately selling or trading in the vehicle.
  • The potential new owner needs a vehicle but doesn't have the cash or good enough credit to take the traditional routes of buying a vehicle from a private seller or dealership.

How to Take Over a Car Loan

Again, these are the basic steps for taking over an auto loan; use them as a guideline ONLY, and always follow your finance company's specific instructions.

NOTE: The following list includes steps for both the original owner and the person trying to take over the car loan.

1. Contact the Bank or Other Lender

As the original car owner, contact your bank or other financing company to ask about its policies regarding auto loan transfers. You might find out it's against your loan contract's policies; or, you might get a slew of instructions on how to begin the process.

As the potential new owner, it's likely you'll work with the original owner's bank (of course, refinancing the auto loan might be a future possibility). Ask about the lender's policies regarding down payments, your credit score (see below), and interest rates.

2. Check Your Credit Score

Before taking over a car loan, it's important to check your credit score. You want to know what you're working with, as lenders use credit scores to determine factors such as interest rates; a poor credit score could get you a higher interest rate than the original owner had, while an excellent credit score actually could lower the interest rate.

3. Wait for Loan Approval

Once both parties have worked with the financing company, it's time to wait for loan approval. Depending on the loan company, the response could be anywhere from immediate to a few weeks down the road.

If the loan is approved, both parties and the bank (or other institution) can move forward with the car loan takeover; if it's disapproved, it's back to the drawing board for both the original and the potential car owner. Perhaps this means considering a more traditional private selling for either party.

4. Sign All Required Paperwork

Once the loan and takeover is approved, the financial institution will present both parties with a number of documents to complete and sign. Generally, this paperwork signs the title and lien over to the new owner; however, because money typically is still owed on the auto loan, the lien will remain in the bank's name until it's paid off.

5. Handle Car Insurance & Other DMV Requirements

Once someone has taken over your auto loan, make sure you cancel your car insurance policy—or at least remove that vehicle from your current policy. You no longer own the vehicle, so you're no longer responsible for its insurance. Also contact your DMV to handle all title transfer and registration requirements.

If you're the person taking over the car loan, make sure you purchase car insurance based on your state's requirements as well as visit the DMV to take care of all title transfer and registration needs.