A Guide to Car Loan Transfer to Another Person

Car loans in India grew by ₹29,432 crore in Q1 FY2026, surpassing home loans. What does this tell us? It reveals that the demand for cars is slowly outpacing the demand for real estate. Another trend following close on the heels of this shift in demand is the rise of the used car market, which has surpassed the new car sales.

If you want to sell a car that you have bought with a car loan, the first thing you must do is ensure a legal transfer of the car loan. The lender allows you to transfer your auto loan to another buyer, provided you meet the eligibility criteria and follow the process. Read on to know how to transfer a car loan, factors to consider before transferring, and the process.

What is a Car Loan Transfer?

A car loan transfer refers to the process of transferring the remaining amount of the existing car loan to another person or borrower. This process entails transferring not only ownership of the vehicle, but also the car loan balance, monthly payments, and associated liabilities to a new borrower.

The auto loan transfer process normally includes checking the new borrower’s reliability, submitting relevant documents, and getting approval from the lender or bank. A new agreement is then drawn, which reflects the remaining loan amount, new terms, and applicable charges.

A lender, in this situation, assesses the eligibility based on the new borrower's credit score and income proof. Once the new loan is approved, the Regional Transport Office (RTO) and insurance company are updated with the new buyer's details to complete the transfer procedure legally and smoothly.

Benefits of Car Loan Transfer to Another Person

Here are the top benefits of transferring a car loan to another person:

• Relief from Financial Burden: If you are struggling to pay EMI, you can breathe a sigh of relief by transferring the auto loan to another person. You will no longer be liable to pay the EMIs.
• Easy Way out of Vehicle Ownership: You can find an easy way out of the car ownership, as you don't have to close the loan yourself.
• Maintain a Good Credit Score: A loan transfer saves your credit profile from the negative impact of defaults or missed EMIs.
• Ease to the Buyer: The new buyer acquires the car without the need to apply for new financing, saving time and possibly even getting improved terms.

Also Read:- Used Car Loan Balance Transfer: Save More on Interest

How to Transfer Your Car Loan to Another Person?

Not sure where to start? Here's a step-by-step guide on how to transfer a car loan:

Review the Loan Agreement

You must start by checking your loan agreement and confirming that there is an option for a loan transfer. This is because not all auto loan lenders in India allow car loan balance transfer. Your existing lender must authorise a car loan transfer to another person.

Find a Suitable Buyer/Borrower

You must now find a borrower who is willing to purchase the car along with the existing loan. Ensure that the borrower has a good credit score and a stable source of income, as it improves the chances of a car loan transfer. If you are unable to find a suitable borrower, you can also consult with a car dealership.

Confirm You Meet the Eligibility Criteria

Every lender follows different eligibility criteria, which can include credit score, monthly income, documents, and more.

Apply for Car Loan Transfer

Gather all the necessary documents and apply for a loan transfer. Submit these documents, including ID proof, address proof, income proof and transfer request form. The lender will assess the buyer's credit history and eligibility, and based on that, will approve the transfer.

Transfer the Registration of the Vehicle

Once you get a suitable borrower, transfer the car's registration to the new owner by visiting the Regional Transport Office (RTO).

Update Insurance Policy

You must also inform your insurance company about the transfer and update the policy to reflect the new owner.

Pay the Fees and Charges Involved

The lender may levy transfer fees or charges, which you must bear. Inquire about and pay any loan transfer fees or processing charges imposed by the lender to finalise the transfer.

Also Read:- How can I Sell my Car Before my Car Loan Ends?

Things to Consider Before You Transfer Car Loan

Consider these factors to ensure a smooth loan transfer:

1. Impact on Credit Score

Transferring a car loan may have some influence on your credit score. It may impact your credit history or account mix because you are closing an existing loan account early. However, if the loan is transferred properly and no payments are missed, you can maintain a strong credit score.

2. Outstanding Loan Amount & Car Valuation

Check if the balance on the loan exceeds the car's current market value. If this is the case, the new borrower may refuse to take over the loan. This means you will have to settle it on your own. This factor is important because negative equity (debt exceeding the car's value) might make the transfer challenging or financially risky.

3. Credit of New Buyer

The lender will evaluate the creditworthiness of the new borrower to determine whether they are eligible to take up the loan. In order to improve your chances, you must ensure that the new borrower has a strong credit score and history.

4. Your Financial Responsibility

If the lender does not officially release you from the debt, you may still be financially liable if the new borrower defaults. To avoid future issues, ensure that the lender formally approves the transfer and that each responsibility is duly reassigned.

Conclusion

If you are experiencing financial difficulties or need to restructure your existing debt obligations, a car loan transfer is a viable solution. It enables you to transfer the debt to a new borrower, thus enhancing repayment flexibility and savings through more favourable loan terms. However, you must evaluate its influence on your credit score and the new borrower's financial trustworthiness before proceeding.

While buying a new car is a dream for many, a second-hand car is more practical because of its low cost of ownership and slow depreciation. This is why Poonawalla Fincorp provides a low-interest pre-owned car loan of up to ₹75 lakh. Apply for the second-hand car loan now!

FAQs

Is a car loan balance transfer possible without selling the car to another person?

No, it is necessary to transfer the ownership of the car before transferring the car loan to another person. The transfer process is complete once the car ownership is legally transferred and the lender approves it.

Do I need to pay any charges for transferring a car loan?

Yes, lenders may charge some processing or transfer fees. The charges vary depending on the remaining loan tenure and the principal. Also, you may need to pay RTO charges for the transfer of car ownership and other documentation expenses.

Can I transfer a car loan to a family member?

Yes, many lenders allow intra-family transfers, but the procedure remains the same. The family member needs to qualify for the loan transfer independently and complete the vehicle ownership transfer via the RTO.

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

Yes, a lender may reject the loan transfer application if the prospective buyer fails to meet the qualifying requirements or has poor creditworthiness. In such situations, you will continue to be the official and financial owner of the vehicle.

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

Some lenders may not allow the new borrower to modify the loan, changing the EMI amount, loan duration, or interest rate, based on their credit history and ability to repay.