When you decide to sell your car with an active car loan, you will have to transfer your car loan to the buyer. It is possible to transfer a car loan to another person in India.
What is a car loan transfer?
A car loan transfer refers to the process of transferring the outstanding balance of an existing car loan from one person to another. This usually happens when the car owner decides to sell the car to someone else but still has an active loan on it. The buyer agrees to take over the remaining loan amount, and the lender (usually a bank or financial institution) approves the transfer, thereby shifting the responsibility for repayment to the new owner.
A car loan transfer can also refer to transferring an existing loan from one bank or financial institution to another, often referred to as a "loan balance transfer." This process allows the borrower to move their car loan from the current lender to a new one, typically to take advantage of better interest rates, lower EMIs, or more favourable terms.
Transfer your car loan to another person: A step-by-step guide
Here are a few steps to help you through the process of car loan transfer to another person.
1. Check the loan terms:
The first thing that you need to do is to check your loan agreement. Ensure that your lender permits you to transfer the loan to another person. If your loan agreement forbids loan transfers, you will have to pay off the loan balance entirely before selling the car.
2. Find a suitable borrower:
It is essential to find someone willing to take over ownership of your car and the loan. Look for potential borrowers, explain the loan transfer process, and share the necessary details of your car. Research on how much you can sell the car and negotiate a suitable price. You can find buyers through online platforms or local car dealerships.
3. Review the borrower’s profile:
Ensure that the borrower has a good credit score before transferring the loan. The new borrower will have to submit a few documents to the lender for approval. These include ID proof, address proof, income proof, and other relevant documents.
4. Transfer the car registration:
Once you find a buyer for your car, you will need to transfer the car registration to the new borrower's name. Visit the Regional Transport Office (RTO) and follow the succession process. There are charges attached to transferring the car registration, which you will need to pay.
5. Submit the necessary documents:
Along with loan documents, you will have to submit other necessary documents, like ID proof, address proof, and the transfer request form. The documents required to transfer the loan will vary from lender to lender.
Additional read: What is a car loan top-up?
6. Manage the insurance:
You need to inform your insurance company to transfer the car's insurance policy to the new borrower's name. Submit the loan documents to the insurance company to effect the changes.
7. Fees and charges:
When transferring the loan, the lender may levy processing and transfer fees. The charges depend on the remaining loan tenure and the principal amount. Check with your lender and learn about the processing charges for the car loan transfer.
Charges involved in a car loan transfer
Car loan transfers, whether from one person to another or from one bank to another, often involve several charges. These may include processing charge, documentation charges and more. It’s important to check the specific terms and conditions with your lender to understand all potential charges before proceeding.
To conclude, you need to manage the documentation carefully and pay the necessary fees and charges to transfer a car loan to another person. You can also explore the car loan balance transfer option to transfer your car loan to Bajaj Finance for better terms.
