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Whether you no longer need your car or want to get rid of your car payments, you may have considered refinancing your car loan to someone else. But is this even possible? 

Let’s take a closer look at the process required to get rid of your car loan and transfer ownership to another person.


Key Points

  • Refinancing or transferring a car loan to someone else is uncommon in Canada.
  • If you want to move your car loan to someone else, your best bet is to sell your car to the individual. You’d then use that money to pay off your car loan.
  • The other person would need to get approved for a car loan on their own merit in order to get financing to take over your vehicle.

Can You Refinance A Car Under Someone Else’s Name? 

Directly refinancing your car into someone else’s name is typically not possible. Instead, you will need to go through the process of selling your car to the buyer, then use the funds to pay off your car loan and then transfer the title to the buyer.  


How To Transfer Your Car Loan To Another Person

To transfer your car loan to someone else, follow these steps:

Step 1: Sell The Car To The Buyer

The first thing you need to do is come to an agreement on a sale price with the buyer. Once an agreement is reached, the buyer will need to secure their own financing based on their credentials to pay for the car. Once the buyer has the funds to cover the cost of the vehicle, either you or the lender (depending on the means of financing) will receive the funds directly.  

Step 2: Pay Off Your Car Loan

After you’ve received payment from the buyer, you must fully repay the outstanding balance of your current auto loan. Be sure to contact your lender to confirm the exact amount of the loan payoff so you can fully settle the loan. Once the loan is repaid, you’ll be provided with a statement that confirms the release of the lender’s lien. This confirms that you’ve been cleared of your debt.

Step 3: Transfer Ownership Of The Vehicle

When the loan is fully repaid, the lender’s lien will be removed from the car. At this point, you can transfer the title to the buyer. A title transfer requires relevant paperwork to be completed, which usually involves a bill of sale with information such as the following:

  • VIN
  • Make and model
  • Sale price
  • Contact information of the buyer and seller

Other documents may also be required depending on where you live, such as a used vehicle information package (UVIP) or proof of a safety inspection. To complete the title transfer and register the vehicle in their name, the buyer must visit their local motor vehicle registry office. They may also be required to show proof of insurance and pay any additional fees.


Want To Lower Your Car Payments?

Speak with a Loans Canada representative today and learn how you can refinance your car loan and save. Call us today at 1-877-995-6269 or click here.

Note: Program is currently not offered in Quebec.

Can You Transfer A Car Loan To Another Lender?

A direct transfer of a car loan from one lender to another is not common. You would instead refinance your loan with a new lender or apply for a new loan with a different lender. In this case, you would apply for a car loan with another lender and use the money from the new loan to repay your original loan. This essentially transfers the debt to the new lender.


Can You Transfer A Car Loan To Someone Else If You Have Bad Credit?

Generally speaking, it’s the new borrower’s credit that matters most, rather than your credit score. That said, some lenders may require that the current loan is in good standing before considering a transfer.


Can You Transfer A Car Loan To Someone Else If They Have Bad Credit?

If the new borrower has a bad credit score, the chances of them “taking over” the loan are low. As mentioned, lenders require borrowers to have good credit before they approve a car loan. 

That said, alternative lenders may be open to working with bad credit borrowers. Instead of looking solely at their credit score, they’ll also look at income and overall debt, though the interest rate may likely be high to offset the lender’s risk.


Can You Refinance An Upside Down Car Loan? 

An “upside down” means there is negative equity in the vehicle. In other words, you owe more on your remaining car loan balance than what the car is currently worth. 

The question is, can you refinance a car loan that’s upside down?

Many lenders may not be willing to get involved in a refinancing of an upside down car loan, but some will. You’ll have better luck with alternative lenders than with traditional banks in this regard. 

How To Calculate Negative Equity

To calculate the negative equity in your car loan, look up how much your vehicle is currently worth. You can do this by conducting a quick online search and checking the sale value of cars that are similar to yours. Then, find out how much you owe on your car loan and subtract that amount from the car’s estimated value. 

For instance, if your car is worth $10,000 but you owe $13,000 on your loan, you have a negative equity of $3,000.

  • Outstanding car loan: $13,000
  • Car value: $10,000
  • Equity: -$3,000

If you can refinance your loan at a lower rate than what you’re currently paying, you may be able to turn that negative equity into positive equity much faster. 


Alternatives To Transferring A Car Loan

There are other options that you might want to consider besides transferring your car loan to someone else, especially if you’re looking to free up your finances:

Sell The Car

A person who is willing to take over ownership of your vehicle can simply apply for their own car loan in their name, and use that money to finance the car purchase from you. Their lender will pay your lender off directly, or give the funds to the buyer who can then pay you for the car. This will effectively pay off your car loan and relieve yourself of ownership. 

Refinance With A Cosigner

Having a cosigner on your loan who has a strong credit profile can help reduce your loan payments, as their affiliation with the loan may reduce the lender’s risk. In turn, the lender may be willing to offer you a lower interest rate, making your car loan more affordable. 

Trade In Your Car

If you’re looking to upgrade your car, you can trade in your current vehicle and use the proceeds towards the purchase of a new vehicle. This is a good option if you are unable to refinance your car loan.

Learn more: Should I Trade In My Used Vehicle Or Not?


Tips On Refinancing Your Car Loan Under Someone Else

Before going through the process of finding a buyer to take over your car, keep the following tips in mind:

  • Find Out If There Are Any Prepayment Fees. Ask your lender if there are any penalty fees for paying your car loan off early in order to sell it and transfer ownership to someone else.
  • Estimate The Current Value Of Your Car. This is important not just if you plan to sell, but also if you want to find out how much equity (or lack thereof) you have in the car.
  • Verify The Buyer’s Creditworthiness. For the buyer to take out a loan and use the funds to finance the purchase from you, they’ll need to have a decent credit score and financial profile to get approved for a loan in their own name.
  • Have All Your Documents Ready. Be prepared for the transfer with the appropriate documentation, including the vehicle ownership document, maintenance records, vehicle history report, warranty documentation, or anything else that the buyer may require.

Final Thoughts

Whatever your reason may be to want to refinance your car loan, it ultimately requires that you sell your car to another person. Refinancing or transferring your car loan to another person directly doesn’t typically happen in Canada, though this is subject to lender approval. The buyer would have to get approved for their own car loan, then take over ownership.


FAQs On Refinancing Your Car Loan Under Someone Else

Who can I transfer my car loan to? 

You can’t technically “transfer” an auto loan to another person unless the process also involves transferring ownership. Generally speaking, transferring ownership of the car means selling it first. Then, the new owner will take out their own car loan using their credentials, and use the funds to cover the purchase of the vehicle.  

Can you take out a loan in another person’s name?

No, you cannot take out a loan in another person’s name. This would be considered fraud. However, you may be able to cosign a car loan with someone else.

Can I refinance with the same lender?

Yes, as long as your current lender allows it. While some lenders may be willing to refinance their own car loans, others might not.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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