While you probably weren’t planning on selling your car before the end of your loan term, a lot can change over the course of a few years. This can make you wonder if you can transfer your car loan to another person.
If it is possible to sell your car while it is still under financing, it is unlikely that your credit agency will allow you to transfer your loan to someone else.
The reason is quite simple. Banks and other lenders are required to comply with ASIC’s Responsible Lending Conduct Obligations, which state that credit license holders should not enter into a credit agreement with a consumer if it is not appropriate. to the consumer.
Before a lender approves a loan application, they will determine whether the loan amount, interest rate, repayment fees, loan term, and other factors are appropriate for personal financial circumstances. of the borrower.
If the lender allowed you to simply transfer your car loan on behalf of someone else, they would be in breach of their obligation to carefully assess the person’s financial situation and determine if the loan is right for them.
After all, the loan product that is best for your financial situation won’t necessarily be right for someone else.
Fortunately, there are other options.
How do I sell my car before paying off my loan?
If you need to sell your financed car before the end of its loan term, you will usually have the following two options:
- Use your savings to pay off the balance owing, then sell the car to recover the costs, or;
- Put the car up for sale and ask the buyer to pay off the loan balance upon the transfer of ownership.
If you are able to tap into your savings and pay off your loan before you put your car up for sale, you may find it easier to attract serious buyers because it will no longer be crowded. This option can also make the sales transaction easier, as the buyer can simply make payment to you directly.
If you are unable to repay the loan before you sell your car, you can use the money you earn from the sale to pay it off. Just make sure you are transparent with potential buyers when selling an underfunded car.
Many credit providers will allow you to process the transaction at a branch, so that the buyer can be present to witness the repayment of the loan before ownership is transferred to their name.
If you sell the car for more than what is owed on the loan, you can expect to receive the balance after the costs are covered. On the other hand, if you sell the car for less, you will have to pay the gap.
And if the buyer is considering using an auto loan to purchase the car, their credit provider should be able to contact your credit provider directly to go through the transaction process.
Whichever option you choose, keep in mind that you may be charged prepayment and exit fees if you pay off your loan before the end of its term.