Have you ever wondered if you can transfer your car loan to someone else? It’s a common question among Canadian drivers who want out of a loan without selling the vehicle themselves.
The good news is that some lenders allow loan assumptions — where someone else takes over the loan — but the process isn’t always simple. Before you hand over the keys, here’s what you need to know about how car loan transfers actually work.
Key Points:
- Car loans can sometimes be transferred in Canada, but only if the lender allows it and the new borrower meets credit and income requirements.
- Most traditional banks don’t allow direct car loan transfers; instead, they may require refinancing or a new loan in the buyer’s name.
- Alternatives include refinancing, selling the car, or a lease takeover, which is often easier than transferring a loan.
- Most other loan types cannot be transferred, though mortgages may be assumed with the lender’s permission.
Can I Transfer My Car Loan To Someone Else?
Yes, you can transfer a car loan to another person in Canada, but not all lenders allow it. The process varies by lender and requires approval. Most banks and auto financing companies will only approve a transfer if the new borrower meets their income and credit criteria.
How Does The Transfer Process Work?
If your lender allows the transfer of your car loan to someone else, the process would work as follows:
- Check Your Lender’s Policy: As mentioned, not all lenders allow transfers. Contact your bank or financing company first.
- Find A Qualified Borrower: The new borrower must apply for a loan and meet income and credit score requirements.
- Submit An Application: Both you and the borrower must provide documentation to the lender.
- Get Approval: The lender will review the application and documents and decide whether to allow the transfer.
- Legal Paperwork: If approved, the loan contracts will be updated to reflect the new borrower.
| What If I Want To Transfer A Car Loan To A Family Member? Transferring a car loan to a family member typically follows the same steps as any loan transfer. That means you’ll need to contact your lender and review your loan terms. Then, the family member will need to complete a loan application and provide documentation |
Which Lenders Allow Car Loan Transfers?
As noted, not all lenders allow car loan transfers. In fact, your only option may be with an alternative or private lender.
Traditional banks typically do not allow car loan transfers. Instead, they may offer refinancing options, allowing a new borrower to apply for their own loan and assume the payments. In this scenario, the new applicant must complete the standard loan approval process. Once approved, they can use the funds to purchase the vehicle directly from the original borrower.
Alternatives To Car Loan Transfers
If your lender doesn’t allow transfers, there are other options to consider:
Refinance
Car loan refinancing means replacing your existing auto loan with a new one, usually from a different lender. The goal is to secure better terms—such as a lower interest rate, reduced monthly payments, or a shorter repayment period. In Canada, refinancing can help borrowers save money or adjust their loans to fit changing financial circumstances.
Learn more: Refinancing A Car Loan In Canada
Sell Your Car
Use the proceeds to pay off the loan, then transfer ownership debt-free. Alternatively, consider purchasing a more affordable vehicle that better fits your budget.
Lease Takeover
If you’re leasing, many companies make lease transfers easier than loan transfers. A car lease takeover happens when the existing leaseholder transfers their lease to another person. Once the transfer is complete, the individual assumes the loan contract, becomes responsible for the monthly payments and complies with all the original lease terms and conditions.
Can Other Loan Types Be Transferred To Someone Else In Canada?
Aside from car loans, are there any other loans that may be transferred to another person?
Can You Transfer Your Mortgage To Another Person?
Yes, it’s possible to transfer your mortgage to another person in Canada. However, the new borrower must apply and be approved by your lender, who will review their income and credit score. This typically happens through either an assumption of the existing mortgage or by the new borrower obtaining a new mortgage to pay off yours.
Once approved, the new borrower takes over the mortgage payments.
How To Transfer Your Mortgage To Another Person
Before you transfer the mortgage, the contract must state that it may be assumed by someone else. An “assumable” mortgage means that you can transfer the outstanding balance to another individual.
In addition, the new owner will still need to get approved for a mortgage, which means the lender will review the buyer’s credit score, financial history, and income to ensure they can make the mortgage payments.
Alternatives To Transferring Your Mortgage
If your mortgage is not eligible for transfer from one person to another, you may want to consider the following:
- Refinance: If interest rates have dropped, refinancing could lower your monthly payments. Alternatively, you could choose a longer term, which would also come with lower monthly payments but higher interest costs overall. In both scenarios, a break fee would likely apply.
- Port Your Mortgage: If you’re planning to sell your current home to buy a new one, you could transfer your mortgage to your new property. This is known as ‘porting’ your mortgage, but you may need a bridge mortgage if the dates don’t align to both closing dates
- Break The Contract: You can sell your home by breaking your mortgage contract early. But you’ll likely have to pay a hefty penalty fee for it.
Can You Transfer Your Personal Loan To Another Person?
Since personal loans are based on your financial health and credit score, they can’t be transferred to someone else. Your lender initially extended the loan to you after assessing your specific financial situation.
If the personal loan was transferred to another person, the lender could likely be at risk. That is, if the person to whom the loan is being transferred to has a poor credit score or financial history.
The only way that you would be able to get rid of a personal loan is to fully repay it.
See How Much You Qualify For
Can You Transfer Your Student Loans To Another Person?
Student loans generally cannot be transferred to another person. However, you can grant someone power of attorney to manage the mortgage on your behalf, or you may be able to refinance it privately with another person if they meet the lender’s qualifications.
However, the debt remains your responsibility until it is fully repaid.
Final Thoughts
If you no longer want or need your car loan at some point in the future, find out whether the loan can be transferred to someone else. Speak with your lender first. Regardless of whether the loan is transferred, the person assuming it must meet the loan criteria. Keep in mind that most loans cannot be transferred, but instead, the other person will need to initiate their own loan application and meet the criteria on their own.
