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Is it possible to transfer a car loan to another person?

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Life is full of unexpected twists and turns, especially when it comes to our finances. While you may not have anticipated selling your car before the end of your loan term, circumstances can change over the course of a few years. Whether it be a new job opportunity overseas, or simply being unable to afford the cost of maintaining finance, you may be wondering about the possibility of transferring your car loan to another person.

Transferring a car loan to another person

It is possible to sell your car while it’s still under finance, however it’s not possible that your credit provider will allow you to transfer your car loan to someone else. All lenders are required to comply with ASIC’s responsible lending conduct obligations, which mean lenders must not enter into a credit contract with a consumer if it is unsuitable for the consumer. If the lender was to allow you to simply transfer your car loan into someone else’s name, they would be failing to meet their obligation to carefully assess the individual’s financial position and determine whether the loan would be suitable for them. All lenders are required to comply with responsible lending obligations, which mean lenders must not enter into a credit contract with a consumer if it is unsuitable for the consumer.

Can I sell my car before paying off my loan?

As mentioned above, if the lender has a financial stake in your car, you will ultimately need permission from the lender before you can sell it.

The car is 'security' or collateral and your loan agreement gives your lender certain rights in relation to the car. It cannot be sold or traded-in without repaying the loan in full to the lender – the principal, or balance the consumer owes the financier.

There are options if you need to sell your financed vehicle before the end of the loan term. These are outlined below.

Use savings to repay the balance

If you are able to dip into your savings and pay off your car loan before listing your car for sale, you may find it easier to attract serious buyers. This means your vehicle will no longer be encumbered. This option can also make for a smoother transaction if selling the vehicle privately, as the buyer can simply make the payment directly to you without having to factor in the finance that remains owing.

Utilise proceeds from sale to repay the balance

If you are not in the position to be able to pay out the loan before selling your car, you could use the money you make from the sale to pay it off. Just ensure that you are transparent with potential buyers when selling a car that’s under finance.

Your lender will likely send you a final payout letter which includes the details of how much is owing on your loan, and the account details of where to pay the funds to in order to finalise your loan. You can provide this letter to the buyer so they can make the payment directly to your loan account, giving them peace of mind the finance is completely paid out.

If you are looking to trade-in your financed car to a dealership, the situation requires you to negotiate terms with both your lender and the car dealership. Negotiating across the two parties helps determine if your current car’s trade-in value can cover your outstanding car loan balance.

How to check if a car has finance owing

If you want to double-check whether you still owe money on your car loan, you can simply ask your lender. It is possible a lender will charge you a fee to check this. An alternative option to avoid this fee is to complete a $2 PPSR check to see whether you still owe money on your car. This PPSR check can also be helpful as it will tell you the lender you owe money to, in the instance you are unsure of this.

Final Words

To help avoid the need to sell an encumbered car, pick or switch to a car loan with a low interest rate that gives you manageable repayments. loans.com.au ’s car loan products have some of the lowest interest rates on the market. Chat to one of our expert lending specialists to apply for a car loan or to talk about your financing options today.

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About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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