How to Transfer a Car Loan from One Person to Another

Can we transfer car loan from one person to another

The question “Can we transfer car loan from one person to another?” arises when vehicle ownership changes hands. It can be due to sale, gifting, or other reasons. Generally, transferring a car loan to another person involves the lender’s approval, as they need to ensure the new borrower meets their credit and financial requirements. 

It may require a new loan application or refinancing. While not always straightforward, it is possible to transfer a car loan, provided all parties meet the necessary conditions and legal obligations.

Process to transfer car loan to another person

Transferring a car loan from one person to another requires specific steps to ensure a smooth transition. Here is a general outline of the process.

• Contact the lender

Not all lenders permit this, so checking their policies is crucial.

• Credit evaluation

If the lender allows a transfer, the new borrower must undergo a credit evaluation to meet the lender’s requirements.

• Submit the necessary documents

The new borrower will likely need to submit financial documents, identification, and other information as part of the loan application process.

• Approval and reassignment

Once the lender approves the transfer, the car loan is reassigned to the new borrower. This step may involve additional paperwork or fees.

• Finalizing ownership transfer

Along with transferring the loan, you must update the vehicle’s title and registration to reflect the new owner’s details.

Charges to transfer car loan to another person

The following are the essential fees and taxes you may encounter during the process.

• Loan transfer fees

These fees are charged by the lending bank to process the loan transfer request and are usually non-refundable. The amount can be between ₹500 and ₹1,000.

• Stamp duty

The stamp duty rate varies by state, usually between 3% and 5% of the loan amount. 

• RTO charges

These fees vary depending on the state and usually range from ₹300 to ₹500. 

• Other charges

Additional costs may include legal fees for processing documentation, payments for the new loan application, and insurance premiums to update the car insurance policy with the new owner’s details.

Documents required to transfer car loan to another person

Here are some essential documents to transfer a car loan to another person.

• Loan transfer request form

It includes basic information about the loan and the new borrower.

• ID proof

Common forms of ID include a passport, driver’s license, or national identity card.

• Address proof

Documents like utility bills, rental agreements, or official government correspondence can help validate the new borrower’s residential address.

• Income proof

This might include recent pay slips, bank statements, income tax returns, or an employment verification letter.

Bottom line

Transferring a car loan from one person to another can be a practical solution when circumstances change. However, it requires careful coordination with various parties. Understanding the fees, documents, and processes is crucial for a smooth transition. Communicate closely with your lender and local authorities to manage additional requirements or regulations. With proper implementation, you can make this transition with minimal hassle.