If you're stuck with a car loan you no longer want or can’t keep up with the payments, the idea of transferring it to someone else might sound like a way out. Maybe a friend or family member is willing to take over the car and the EMIs, or you’re selling your vehicle and want the buyer to continue the loan. But can a car loan actually be transferred to another person? Let’s break it down clearly so you know what’s possible, what’s not, and what steps you need to follow if you want to make this happen.

Can You Transfer a Car Loan to Someone Else?

Yes, but it's not as simple as handing over the keys. Car loan transfers are possible in some cases, but they depend entirely on your lender’s rules. Most banks and finance companies don’t allow a direct loan transfer unless the person taking over qualifies for a new loan on their own.

If you’re trying to shift the responsibility to someone else, here’s what usually happens:

• The new person applies for a fresh loan.
• The lender checks their credit score, income, and repayment history.
• If approved, that new loan is used to pay off your existing one.
• The car is then re-registered in the new owner's name.
• Insurance details need to be updated too.

Even if your bank allows a formal loan transfer, they’ll still need to run credit checks and verify if the new borrower can take over the EMI payments. It’s not automatic. You’ll have to go through proper paperwork, submit documents, and wait for approval.

If your lender says no, one option is for the buyer to clear your loan fully and then finance the car on their own. Either way, it’s important to talk to your lender first before making any move.

What Does Transferring a Car Loan Mean?

Transferring a car loan means handing over both the car and the responsibility for repaying the remaining loan amount to someone else. The new person agrees to take over the loan, and the lender must approve this transfer after checking the new borrower’s credit history, income, and repayment ability.

Situations Where Car Loan Transfer Is Common

There are many real-life situations where you might consider transferring a car loan to someone else. Here are some of the most common ones:

1. Selling a Car With an Ongoing Loan

   If you're planning to sell your car but the loan is still active, transferring the loan to the buyer can simplify the process and help you avoid foreclosure or prepayment penalties.

2. Relocating for Work or Moving Cities

   When you're shifting to another city or country for work or personal reasons, maintaining the car and loan in your name may not be practical. In such cases, transferring the loan and vehicle ownership to someone else makes sense.

3. Struggling With EMI Payments

   If you're facing financial difficulties or your income has changed, transferring the loan can relieve some pressure. You can hand over the car and the loan responsibility to someone who can manage the EMIs better.

4. Giving the Car to a Family Member

   In some cases, a spouse, sibling, or other family member may want to use the vehicle and is willing to take on the loan. Transferring it formally keeps everything legal and avoids future complications.

5. Divorce or Legal Separation

   In legal separations, asset division often includes vehicles. Transferring the car loan ensures that the financial responsibility lies with the person keeping the car.

How to Transfer a Car Loan from One Person to Another

If you're planning to transfer your car loan, here’s how the process generally works:

1. Check Your Lender’s Policy

   Every lender has different rules. Some allow car loan transfers easily, while others may have strict conditions or not permit it at all. Start by calling your bank or loan provider and asking if a loan transfer is possible.

2. Find a New Borrower

   You’ll need someone who is willing and eligible to take over the loan. This could be a car buyer, a relative, or anyone who meets the bank’s credit and income criteria.

3. Submit a Loan Transfer Request

   Once you have a willing borrower, submit a formal loan transfer application to your lender. They will guide you through the documents required.

4. Credit Check and Approval

   The lender will run a credit check on the new borrower. If they meet the criteria, the loan transfer will move forward.

5. Sign the Revised Loan Agreement

   If approved, both of you will sign a new agreement. The new borrower will become responsible for the EMIs and any remaining balance.

6. Transfer Ownership at the RTO

   You’ll need to visit the local RTO to transfer the vehicle’s Registration Certificate (RC) to the new owner. This step legally completes the ownership change.

7. Update Insurance and Other Documents

   Lastly, update the car insurance with the new owner’s name. Also make sure other related documents reflect the change to avoid future legal or financial trouble.

Documents Required for Car Loan Transfer

To complete a car loan transfer smoothly, both the current and new borrower need to submit the following documents to the lender:

• KYC Documents of the New Borrower
• Income Proof and Bank Statements
• Existing Car Loan Statement
• Vehicle RC, Insurance, and PUC
• NOC From the Lender

Eligibility Criteria for Car Loan Transfer

Before approving a loan transfer, lenders review both parties and the vehicle to ensure the risk remains manageable. Here’s what they check:

• Eligibility of the New Borrower (Income, Credit Score, Employment)
• Existing Borrower’s Repayment History
• Outstanding Loan Amount and Tenure
• Vehicle Age, Condition, and Valuation

Charges You Might Face When Transferring a Car Loan to Someone Else

If you're thinking about handing over your car loan to another person, there are a few charges you need to be aware of. These costs can vary depending on your lender, state, and the buyer’s background, but here's what usually comes up:

1. Loan Transfer Fees

   Lenders usually charge a fee to process the transfer of a loan. This covers their administrative work like reviewing the new borrower's profile, updating agreements, and reissuing documents. It's not a huge amount but expect it to be a few thousand rupees.

2. Stamp Duty

   In some states, stamp duty applies when a car loan is transferred. This is a legal fee for transferring ownership of a vehicle or updating agreements. The amount depends on local laws, but it is something you’ll need to factor in.

3. RTO Charges

   The Regional Transport Office (RTO) will need to update the ownership details in their records. This includes issuing a new Registration Certificate (RC) in the buyer’s name. RTO fees vary depending on the state and the vehicle type. If the car is under a loan, the hypothecation also needs to be updated.

4. Legal Fees

   In some cases, you may need to hire a notary or legal professional to draft and verify sale agreements, transfer papers, or NOC documents. Legal help becomes especially important when the buyer is unknown to you or the paperwork is complex.

5. Insurance Premium

   Once the car is transferred, the insurance policy also needs to be updated. The new owner may need to pay the insurance company to transfer or renew the policy. If the policy is near expiry, they might have to pay a fresh premium before the loan transfer is completed.

Common Alternatives to Direct Loan Transfers

Transferring a car loan directly is not always easy, and some lenders might not allow it at all. These are the workarounds most people use instead:

1. Payoff and New Loan (Most Common Option)

   The buyer takes a fresh car loan in their own name from their preferred bank or NBFC. This new loan is used to clear your existing loan. Your lender gives an NOC (No Objection Certificate), and ownership is legally transferred. This method is cleaner and more acceptable to most lenders.

2. Refinancing

   The buyer applies for a refinance loan on the same car. The new loan pays off your loan, and the buyer gets better terms in their name. This option works if the buyer has a strong credit profile and the car is in good condition.

3. Co-signing

   Sometimes, a family member or friend may co-sign a loan with the new buyer. This makes it easier for the buyer to get approval, especially if they don't meet all the loan criteria. However, co-signers also share full responsibility for repayments if something goes wrong.

4. Taking a Personal Loan to Close the Car Loan

   If the buyer cannot take over the car loan directly, they might consider taking a personal loan. They use that money to pay off your remaining loan balance. This lets you close the loan and proceed with selling or transferring the car.

5. Selling the Car After Loan Closure

   This is the safest method. You pay off your loan completely, get an NOC, remove hypothecation from the RC, and then sell the car. It might need some upfront payment or help from the buyer, but it ensures a clean handover without any legal baggage.

Closing Thoughts

Transferring a car loan to another person is possible, but it comes with rules, paperwork, and approvals that you cannot skip. In many cases, closing the loan and letting the buyer take a fresh one turns out to be simpler and safer. Before you decide, speak to your lender, understand the costs involved, and choose the option that protects you from future liability while making the transfer smooth and legal.

Frequently Asked Questions (FAQs)

1. Car loan transfer vs foreclosure: which is better?

   Foreclosure clears your loan early and improves credit, but comes with charges. Transfer lets someone else take over the loan if they qualify. Choose foreclosure if you have funds. Go for transfer if you're selling the car and the buyer agrees to continue the EMIs.

2. Can a car loan be transferred to another bank?

   Not directly. You or the new borrower must apply for a fresh loan with the other bank. If approved, that loan will be used to repay the existing one, and the car hypothecation will be updated.

3. Can I sell my car if the loan is still running?

   Yes, but only after informing your lender. Either clear the loan first or involve the buyer in a formal loan transfer. The lender must approve the process before ownership changes.

4. What happens to the loan if I sell the car?

   The loan doesn’t go away when you sell the car. You’re still legally responsible for repayments unless the loan is transferred to the buyer with lender approval or paid off completely.

5. Can the buyer continue paying my EMIs?

   Only if the lender approves a loan transfer in the buyer’s name. Informal arrangements are risky. If the buyer stops paying, the responsibility still falls on you.

6. Can a car loan be transferred to a family member?

   Yes, but it’s not automatic. The family member must meet eligibility criteria like income and credit score. The lender will assess and approve just like any regular loan applicant.

7. Does loan transfer affect credit score?

   Yes. A successful transfer doesn’t hurt your score. In fact, it may improve it once the loan is off your record. But missed EMIs before or during the process can negatively impact your credit.

8. Can the lender reject my request to transfer the car loan?

   Absolutely. Lenders can deny a transfer if the new person doesn’t meet credit or income requirements. Some lenders don’t allow transfers at all. Always check their policy first.

9. Will the initial loan term remain the same after the transfer?

   Usually not. The new borrower may get a revised term and EMI schedule based on their loan offer. It’s treated as a fresh loan, so terms may change.