Refinance Your Car Into Someone Else’s Name: Is It Possible

Refinance Your Car Into Someone Else’s Name: Is It Possible

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated January 3, 2022

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.

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

It’s possible to refinance your car into someone else’s name, but the process is typically quite involved and requires more than a few steps to complete. If you no longer want to keep your vehicle and you find someone else who is willing to refinance it in their name, you are still obligated to repay the outstanding loan balance. The loan cannot simply be transferred over from one person to another. 

Essentially, you will need to go through the process of selling the car to the new buyer, who will also take out a loan in their name. Once the buyer has been approved for a car loan, the title of the vehicle can be transferred. However,  your original auto loan must first be fully repaid, either by you or the person buying your car in order for you to be relieved of your car loan obligations. 

How Does Refinancing A Car Under Someone Else Work?

To refinance your car into someone else’s name, you’ll have to go through a few steps:

Add The Person As A Cosigner

When adding a cosigner to the auto loan, the lender will assess their financial health and creditworthiness. If approved, the cosigner’s name will be added to the title of the car loan.

You could stop at this point if the goal is to lower your car payments or improve your credit score. Otherwise, you can continue by taking the next step.

Remove Your Name From The Auto Loan, But Keep The Cosigner

To take your name off the title and the loan, you’ll need to refinance once more. That said, there is a risk that the new lender may not approve your loan application. This can happen if there wasn’t enough time since the car was previously refinanced or if the person applying has bad credit or a low income.

Keep in mind that while these options are available, refinancing a car under someone else’s name might not always work. 

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How To Transfer Your Car Loan To Another Person

Transfer Your Auto Loan To Another Person In Six Steps

Step 1: Review Your Car Loan Agreement

Make sure there are no clauses on your car loan agreement that prevent transfers to other people. If there are, you may be out of luck if you’re looking to transfer the loan to someone else.

Step 2: Find Someone To Take Over Your Car Loan

If you find someone who’s willing to take over an auto loan, they’ll need to qualify for the loan. As such, their credit score and financial health will be assessed by the lender.

Step 3: Contact Your Lender

Find out if your lender will allow you to transfer your auto loan to someone else. Odds are, the lender may not allow this arrangement if you’ve missed payments on your car loan. Otherwise, if the lender allows it, they will let you know what further steps you’ll need to take and the paperwork that must be completed to get the process started.

Step 4: Gather All Documents Together

Once you get the green light from your lender, you’ll need to get all your documents in order and guide the other buyer through the loan transfer process. The new buyer will also have to meet with the lender to complete the process, witness signatures, and set up direct deposit for loan repayment.

Step 5: Transfer the Loan

Verify with the lender to ensure that the loan has been transferred successfully. This is important to ensure that you are no longer liable for loan payments or potential damage to the car going forward.

Step 6: Transfer Ownership of the Vehicle

After the car loan has been transferred to the new buyer, the ownership of the vehicle should also be transferred.

Can You Refinance An Upside Down Car Loan? 

An “upside down” car loan refers to negative equity in the vehicle. In other words, you owe more on your outstanding 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. 

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.

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. 

Check out how you can reduce your car’s depreciation

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. 

Refinance Alone

If you want to lower your car loan payments without giving up your car, refinancing on your own without involving anyone else may be useful. If you have a good amount of equity on your car or have improved your credit score since you first took out the loan, you may qualify for a lower interest rate. 

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.

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 creditworthiness of the buyer. In order 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. 

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.  

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.

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. The buyer would have to get approved for their own car loan, then take over ownership. You can’t just remove yourself from a car loan and add someone else to it.

Lisa has been working as a 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. She's used a variety of financial tools over the years and is currently growing her money with Wealthsimple, while stashing some capital in a liquid high-interest savings account so that she always has a financial cushion to fall back on. She's also been avidly using her Aeroplan TD credit card to collect as many Aeroplan points as possible to put towards her travels!

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