A car loan can represent a huge monthly expense for young couples that can put them in a real financial bind. A car loan contract exists between you and the creditor. You cannot transfer a car loan contract from one person to another. Many other options exist to get out from under a car loan.
Car Loan Contracts
Car financing loans provide a contract between a borrower and a creditor. The borrower signs the contract stating they agree to pay off the car loan using the terms outlined in the contract. In return, the creditor provides the necessary funds to purchase the vehicle. The terms of your car loan depend on your specific credit score and financial abilities. Therefore, it cannot be transferred to another person.
Selling Your Car
Simply selling your car to the other person gets you out from a car loan. They procure their own financing for the vehicle using their own credit and financial standing. They acquire financing with the bank, give you a check for the payoff amount on your car and you sign the title over to them. Using the same creditor you used may speed up the transfer process because they already have the vehicle information.
Being Upside Down
New cars depreciate rapidly from the moment you drive them off the lot. Buying used cars alleviates this issue to some extent, but your car rapidly loses value. The biggest problem with selling your car lies in your total payoff amount. Being "upside down" on a car means you owe more on the car than the car is worth. You need to pay the car loan down far enough that selling the car pays off the balance. Otherwise, you need to fund the rest of the balance on the loan to get the lien release from the bank.
Refinancing Your Car
Refinancing provides an alternative option for young couples who cannot pay their car note. Refinancing involves generating a new contract with a creditor to cover the cost of the loan. It often extends the loan, lowers the interest rate and lowers your monthly payments. The downside includes paying more interest over the life of the loan and paying on it for a longer time.
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