The average car payment for Americans is approximately $600 a month. This is about a 25% increase from just a decade ago. If you are like most Americans and can’t afford $600 car payments, you may be looking for information on how to have someone take over your car loan. Thankfully there are many options available for borrowers who are looking to make their car payments more affordable.
Auto Lease vs. Auto Loan
A car lease is an agreement between a driver and a leasing company that gives a driver access to a vehicle for a set amount of time. While drivers make lease payments on a car, the vehicle still belongs to the leasing company, not the driver. Since the driver does not outright own a vehicle under the terms of a lease, the leasing company can have specific requirements about how the driver may use the vehicle. For example, drivers with a car lease may have mileage restrictions regarding how much they can drive their vehicle within their given lease terms. Leasing companies may charge extra fees to drivers who go over their predetermined mileage.
Car loans, also known as auto loans, are forms of funding used for the explicit purpose of purchasing a vehicle. When a driver purchases a vehicle with an auto loan, it means they own the car outright and may use it however they please. However, car owners may lose possession of their vehicle if they stop making payments on their auto loans.
What Is a Lease Transfer?
In some circumstances, you may be able to transfer your car lease to someone else. By transferring your lease, this means a new person would be responsible for making monthly payments on your vehicle. This may also mean drivers must give up possession of the vehicle to whoever takes over the new lease.
How Can You Have Someone Take Over a Car Loan?
Need someone to take over your car loan? While this may be possible, there are some steps you need to take first.
Keep in mind that having someone take over your car loan means they will gain ownership of the vehicle. So, while you won’t have a car payment to worry about anymore, you also will not have a vehicle. Make sure you can keep up with your day-to-day responsibilities, such as commuting to work, running errands, etc., before having someone take over your auto loan.
Check Your Loan Agreement
First, read over your auto loan contract and look for details about auto loan transfers. Some auto loans have explicit terms that restrict borrowers from transferring their current auto loans to another party. If your contract doesn’t allow for an auto loan transfer, you can look into other options like buyouts, refinancing, or trade-ins.
Talk to the Original Lender
After looking at your contract, talk with your lender and inform them you want to have someone else take over your car loan. They may have other options available, or they may be able to offer helpful advice regarding the transfer of your car loan.
Have the New Buyer Check the Loan Contract
Loan contracts will have all the details of an auto loan, such as the interest rates, payback terms, funding amount, etc. For complete transparency, have the person who is taking over your auto loan read the funding agreement. It is important this person knows what they are getting themselves into.
File New Loan Paperwork
After you and the person you are transferring your auto loan to understand all the details laid out in the loan agreement, it’s time to file new loan paperwork. While many details may stay the same, it is still essential to have formal documentation of an auto loan being transferred to a new owner. Also, depending on the financial situation of the new borrower, they may be able to get an adjustment on loan terms or rates. Borrowers with excellent credit scores are usually able to find loan approval with lower interest rates, more convenient payback terms, and higher funding amounts.
Transfer the Vehicle Title
The last step of having someone take over your car loan is to transfer the title of the vehicle to the new owner. A title transfer makes everything official and establishes a brand-new owner of the vehicle. At this point, you will no longer be responsible for making auto loan payments, and the new owner will gain full access to the vehicle.
Ways To Get Out of an Auto Loan
According to a study by the credit bureau Experian, the average auto loan balance has exceeded $20,000 for the first time ever. With the average car loan balance being around $20,987, it’s no wonder why so many people worry about falling into loan default.
If you feel trapped by your current auto loan and don’t think you will be able to keep up with your monthly payments, it’s important to act quickly. While being late on one car payment isn’t the end of the world, it’s something you want to avoid whenever possible.
Fortunately, there are other ways borrowers can get out of an auto loan that doesn’t involve someone else taking it over! Below are a few options you may consider.
Auto Loan Buyout
An auto loan buyout is when lenders pay off your original loan balance. Buyouts are different than refinancing because borrowers are not typically awarded additional funding.
Auto Loan Refinance
If you are looking for extra cash as well as a loan buyout, refinancing may be your best bet. Refinancing essentially involves taking your existing loan and rolling it over into a new contract with renewed terms, rates, and funding amounts.
You can usually get cash loans fast online with financial institutions like banks, credit unions, or private direct lenders. However, make sure you do your research and compare lenders to make sure you are getting the best deal possible.
Sell or Trade-in Your Vehicle
If your car has positive equity, you may consider selling it in order to get out of your auto loan. Positive equity in a vehicle means that the market value of a car is worth more than the current balance of an auto loan. In other words, the car is worth more than what the car owner owes. By selling a vehicle with positive equity, you can ultimately pay off your auto loan and perhaps get a few extra bucks in your pocket as well!
Voluntary Surrender as a Last Resort
If none of the options above work for you, you may consider voluntarily surrendering your vehicle. Voluntary surrenders should be an absolute last resort when no other options are available. With voluntary surrender, you will simply give up possession of your vehicle. While this will free you of the responsibility of making car payments, it will also leave you without a car and potentially decrease your credit score.
Tips for Avoiding Car Loan Defaults
Check out the tips below for avoiding car loan defaults.
Research Before You Buy
Drivers often end up with upside-down auto loans because they don’t research vehicles before they visit the dealership. When you don’t have a good foundational knowledge of how much certain makes and models should cost, it can be easy to get locked into an auto loan that just doesn’t work for your budget. Researching vehicles and their prices is also a great way to narrow down the types of vehicles you are interested in, so you don’t have to waste your time looking at cars that won’t work for you in the long term.
Create a Budget
If you haven’t already, create a budget so you can calculate how your car loan will fit in with your finances. List all your monthly expenses like rent, groceries, payments to your car insurance company, etc. Be sure to add in your estimated car payments. Creating a budget will help you get a clear idea of how your auto loan payments will work with your existing responsibilities, and it can help you avoid unfortunate financial surprises down the road!
Beware of 0% Down Offers
Slick salespeople often try to draw in naïve borrowers with zero money-down offers. While this may seem convenient on the surface, not making a down payment on a car can significantly increase the amount of your auto loan. The higher your auto loan is, the more funding there is to charge interest on, and the longer it will take to completely pay off the balance. Instead, it is best to bite the bullet and make a down payment upfront. You will thank yourself later!
The Bottom Line: Having Someone Take Over Your Car Loan
While it is often possible to have someone take over your car loan payments, this may not always be the best solution. Instead, it may be in your best interest to take care of your auto loan balance on your own through other options like buyouts, refinancing, or a debt consolidation personal loan.
References:
Auto Loan Debt Reaches a Record-High $1.43 Trillion | Experian
Many Americans Are Overpaying for Their Car Loans | Consumer Reports