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When you take out a car loan, it may be a good fit for your life and budget at the time. However, auto loan terms can be long — averaging around 69.5 months, according to Experian. Various events can impact your ability to keep up with the payments over five-plus years, from economic downturns and job losses to divorces or breakups. As you’re looking for solutions, you might wonder, “Can someone else refinance my car loan?”
Generally, no. A car loan is tied to the person who owns the car, so refinancing a car into someone else’s name usually requires transferring ownership, too. Below, we’ll review how it works when you want to refinance a car into someone else’s name.
You generally can’t refinance a car loan from one person’s name into another’s. For example, if you want your friend to take over your car payments because you can’t afford them, you wouldn’t refinance to transfer financial liability to them.
Auto loan refinancing replaces your existing car loan with a new one in your name. You can’t use a refinance to change who owns the car.
If you no longer want to be responsible for the payments, you could transfer the title to someone else, and they could qualify for a new car loan on their own.
Someone else can refinance your car loan by purchasing your car with an auto loan of their own. Here’s an overview of how it works:
When this process is complete, the buyer is now responsible for paying the car payments.
If you agree on a sale price higher than your outstanding balance, you can pay off your loan in full and keep the difference. If you agree on a price that’s lower than what you owe, you’ll have to pay the difference to your lender out of pocket.
For example, if your car is worth $15,000 and you owe $8,000, the buyer should pay you around $15,000. You can then pay off your $8,000 loan balance and walk away with $7,000. However, if the buyer pays $7,000, you’d owe it all to your lender plus an extra $1,000.
In some cases, you may be able to refinance and add a co-borrower, then refinance again to have the co-borrower remove you from the loan. However, that involves an extra loan, extra time waiting for an additional title transfer, unnecessary credit score impact, and possibly fees. Selling your car is generally the faster, easier, and more cost-effective option.
When you marry, you may want to want to change who’s listed on a car loan, especially if you’re combining finances or considering buying a home. You can refinance your husband or wife’s car in your name (or vice versa) by following the how-to steps above. Change the ownership of the vehicle, sign over the title, and have the spouse who wants to be on the car loan apply for new financing in their name.
The same process applies for refinancing after divorce. The spouse who buys the car needs their own financing. Even if a court order requires one spouse to refinance or assume the loan, the lender still needs to approve the new borrower.
If your primary goal is to lower your car payment, you may not need to sell your car. Here are a few alternatives to refinancing a car to someone else.
A good place to start is to contact your lender and discuss your situation. Be honest about your financial troubles and ask if they can help. It’s often in their best interest to make accommodations rather than go through the repossession process. Common loan modifications include adjusting payment due dates, deferring payments for a set period, or refinancing the loan in your name to better fit your needs.
Trading in your car for a more affordable one could lower your monthly payments. Sites like Kelley Blue Book can help you estimate the amounts you can expect to get when trading your car in with a dealer or selling it to a private party. You’ll then need to subtract your loan balance to estimate the net amount that would go towards your next car.
Refinancing with a cosigner could help lower your payments, especially if they are well-qualified. A cosigner is someone who agrees to be liable for your auto loan if you fail to make the payments on time.
If you have someone with good credit who is willing to sign for you, their guarantee may help you qualify for better interest rates or lower payments. However, it’s important to understand that if you miss payments, it can lead to credit score damage and collection attempts for you and your cosigner. You’ll want to let them know right away if you ever run into financial challenges.
Refinancing a car makes sense when your credit has improved, rates have dropped, or you’re unhappy with your current lender. It’s also a way to remove a cosigner when you no longer need or want them on the loan with you.
There are many possible reasons to refinance, but transferring ownership isn’t typically one of them. If you’re researching whether you can refinance a car loan in someone else’s name, you might consider refinancing on your own. A new car loan may help you lower your payments so the car loan fits your needs better. Explore different options with RefiJet’s auto refinancing calculator to see how you might save.
Learn more about auto loan refinancing and ownership transfers.
Whether you can refinance a car without a co-owner depends on the laws in your state, the verbiage on your title, and the rules of your lender. Generally, if the ownership is joint tenancy, then either of the owners has full authority. However, if it’s tenancy in common, both signatures are required.
You can refinance with someone who is not on the title if the lender allows cosigners. Cosigners aren’t typically added to titles but guarantee the loan, which can help you qualify and get better rates.
If you want to take over someone else’s car loan, their loan would need to be assumable, which is rare. In most cases, you’ll need to get a separate loan in your name and use it to buy the car. The seller can then use the funds you provide to pay off their outstanding balance.
You’ll typically need to sell the car to your business. Your business can buy the vehicle using a credit product, such as a business auto loan or credit card. You then use the funds to pay off your personal auto loan and transfer the title to your business, and then your business pays off the remaining balance.
To refinance your spouse’s car loan into your name, you’ll need to take over ownership, too. That involves signing over the title and re-registering the vehicle in your name, then applying for a new auto loan under your name.
Learn whether you can refinance a car loan with high mileage, what lenders consider, and how vehicle age and mileage affect approval.
