The right way to Refinance a Automobile right into a Completely different Title

If you’re having difficulty making your auto loan payments, or if you feel you aren’t using your vehicle enough to make the payments worthwhile, you can’t just refinance the car into a friend’s or family member’s name. Other options are available to you, however. They include selling the vehicle or approaching your lender about refinancing with a co-borrower. Whether you think refinancing, securing a co-borrower, trading in your vehicle, or simply selling it is best, it’s important to understand all your options. This article explains how to refinance a car into a different name by transferring car ownership.

If you have any questions about your personal circumstances and your options for what you can do with your car loan, fill out our form to find your best solution.

Can You Refinance a Car Under a Different Name?

While you have options for refinancing or transferring a vehicle’s ownership, you can’t directly refinance a car into a different name. There’s an exception in cases when a person is just a cosigner and, therefore, not listed as an owner of the vehicle. It’s typically not possible for somebody else to assume financial responsibility for your car without also assuming ownership of the vehicle. This is a legal matter. By law, a borrower or co-borrower listed on a loan agreement must own or co-own the vehicle.

How to Transfer a Car Loan to Somebody Else

In most cases, the only way to transfer a car loan to somebody else is to refinance the vehicle twice. While possible, it’s important to remember that at the end of the process, the vehicle will have a new owner, and you’ll no longer own the car. Depending on who the owner is — you might sell it to a family member, for example — you could secure insurance as an occasional driver of the vehicle, but you still wouldn’t own it anymore. Follow the below steps to refinance a car into a different name:

1. Refinance the Vehicle with a Co-Borrower

You can apply for a loan with a co-borrower. This could be someone who ultimately plans to solely own the vehicle. Sign a loan agreement that gives them equal responsibility for the loan and makes them co-owner of the vehicle. You’ll need to add the co-borrower as an owner of the vehicle.

2. Refinance the Loan a Second Time to Remove Yourself from the Loan

The original co-borrower can then apply for a second refinancing. With this agreement, you simply would not include your name in the contract to make the initial co-borrower the sole holder of the loan. This relieves you of ownership of the vehicle and the obligations of your loan agreement.

Downsides of Refinancing Your Vehicle Twice

Refinancing your vehicle twice as a means of transferring loan obligations is probably not your best option, and in some cases, it’s not even possible. Requirements for refinancing, including legal requirements, vary according to the lender and your location. Businesses and financial institutions may also have different requirements as a matter of policy. For example, if your loan is relatively new, a lender may not approve your refinancing application. It’s also wise to be mindful of how often and when you refinance a loan.

There’s no legal limit on how many times you can refinance a car loan, but that doesn’t mean that refinancing is free from penalties or downsides. Refinancing a loan twice in a short period can hurt your credit score, and having a poor credit score can negatively impact your ability to secure future loans, mortgages, and rental agreements. That’s why meeting the initial obligation of any loan you sign is crucial. It’s also important to remember that you’ll have to pay loan origination and title transfer fees to refinance your vehicle into somebody else’s name twice.

Alternatives to Refinancing a Car Loan into Somebody Else’s Name

While refinancing your automobile loan into somebody else’s name twice might be possible, it’s probably not your best option. If you’re concerned about your ability to make your car loan payments, you need the money for something else, or you just don’t use your vehicle enough to justify the loan, it’s helpful to know your options. Here are some other things you can do if you’re looking to restructure or get out of your current car loan agreement:

Sell Your Car

If your vehicle loan payments are becoming a problem, selling the car is the simplest and most effective solution. This is an easier process than refinancing twice, and it doesn’t carry the same danger of damaging your credit score. However, it’s important to note that transferring vehicle ownership is more complicated when you have a loan you’ve yet to pay off than if you own the vehicle outright. Even so, it’s still possible.

If you want to sell your car, but your loan is not yet paid off, you have a lien on the car. This means that whoever loaned you the money has a legal claim to the car until you’ve paid off the loan or transferred it to somebody else. With a loan still outstanding, the simplest way to sell your car is through a dealership. This can minimize negotiation and help with paperwork. You can still sell the car privately if you want, though you’ll need to prepare to transfer the vehicle title yourself. In any case, you’ll have to pay the existing car loan off before you can transfer ownership of the car to a dealer or individual.

Refinance Your Loan with a Co-Borrower

Rather than taking the extra step of refinancing a loan twice to remove your name from the agreement, consider refinancing once. If you know somebody who’s willing to take co-ownership of your vehicle and existing loan, you can approach your lender or finance provider about refinancing with them. Doing so will make the second party the co-borrower. Registering the vehicle and loan in their name and yours gives them equal rights to the vehicle and equal responsibility for paying off the loan.

Modify the Auto Loan Agreement

Banks, financial institutions, and other lenders typically prefer their borrowers to honor the initial agreement they sign. However, that doesn’t always happen. People refinance and renegotiate contracts every day. Lenders know this, and they’re often prepared to entertain the idea of modifying their agreements with clients. A lender won’t agree to a refinancing that doesn’t benefit their own interests, but if a borrower looks like they may default on a loan or is simply taking a long time to pay it back, the lender may be open to renegotiating the terms of the contract.

Refinance the Loan by Yourself

It might be wise to consider what you can afford and draft some possible car payment plans before applying for loan prequalification. Shop around for the best option, and with a little luck, you’ll be able to lower your monthly payment. If you have positive equity in your car, meaning it’s worth more than what you owe, you might qualify for a lower annual percentage rate. You could also get a lower rate if your income or credit score has improved.

Trade In Your Vehicle

If you need a vehicle, but your loan repayments are becoming too demanding or you’re just looking to save some money, consider trading in your vehicle for a cheaper model. You might be able to get preapproval for a loan for a more affordable car. While you may not want to give up a reliable vehicle you love, fulfilling your loan repayments is important. Trading in your vehicle can enable you to do this.

Selling Your Vehicle with an Outstanding Loan

Many options for reducing or eliminating auto loan payments involve selling your vehicle. When selling a car, you must consider registration and insurance. A further complication is the loan. Selling a car with a lien on it requires some extra steps. Here’s how to sell your car when you have an active loan:

1. Contact Your Lender

Selling your car doesn’t mean you won’t owe your lender any money: You’ll still have to pay off the remaining amount on your car. Contact your lender and ask for a 10-day payoff amount. The 10 days are important for accounting for any interest charges that can accrue before your check clears.

2. Determine Your Vehicle’s Value

It’s important to get an estimate of your automobile’s actual cash value (ACV). You can get this estimate online from various services, including NADA Guides and Kelley Blue Book. Once you have an estimate of your vehicle’s ACV, compare that with your payoff amount to determine what kind of equity you have. If your payoff amount for your car loan is higher than the vehicle’s ACV, you have something called negative equity. This is not good because it means that you owe more on your loan than your vehicle is worth.

If, however, the amount you owe your lender is less than the vehicle’s ACV, you should be able to sell your vehicle and make some profit on the transaction. If you have negative equity, you’ll likely sell your car for less than what you owe your lender, so you’ll have to pay the difference to remove the lien from the title and proceed with your vehicle sale.

3. Secure the Proper Paperwork

Once you receive your release of lien letter from your lender, you can give it to the buyer of your vehicle. Remember to include the signed title. This is important because, without it, the buyer cannot transfer the title. With the title, the buyer can transfer ownership at their state’s Department of Motor Vehicles or Secretary of State office, depending on where in the U.S. they live. The buyer will also need to pay for the title, registration fees, plates for the vehicle, and any applicable sales taxes on the car purchase.

So, What’s the Best Way to Transfer a Car Loan? Sell the Car

Ultimately, though, the best solution is typically to sell the car. Unless you have a family member who can assume co-ownership of your vehicle and the accompanying loan, you’ll probably want to sell the car. You can always approach your lender about modifying the loan agreement or refinancing the car in your name or with a co-borrower. These options may not prove fruitful, but they’re worth exploring. And keep in mind that trading in your vehicle might be a good option. You may end up with an older or less stylish vehicle, but you at least won’t have to worry about such high loan payments.

Hearst Autos Research, produced independently of the Car and Driver editorial staff, provides articles about cars and the automotive industry to help readers make informed purchasing choices.