How to Transfer Your Car Loan to Another Bank

Car loans assist individuals in purchasing four-wheelers, but over time, the debt can become overwhelming, making repayments challenging. In some cases, selling the car or transferring the loan to a new lender may appear to be the most viable option. 

Transferring a car loan to another bank allows you to move your remaining loan balance to a new lender, often to secure more favourable terms. This can result in lower interest rates, provided you are eligible.

Additionally, most people selling their vehicles prefer to settle the outstanding loan rather than transfer it to the buyer. However, for first-time users, the process may seem complicated. It is important to understand the eligibility criteria for balance transfers and top-ups. 

A car loan balance transfer involves transferring the remaining balance of your current car loan from one lender to another, typically to secure a lower interest rate or more favourable loan terms.

Here is an example to clarify the car loan transfer process:  

Suppose you have a car loan with lender X, but lender Y offers a better interest rate. You apply for a balance transfer with lender Y, submit the necessary documents, and receive approval. Lender Y considers the EMIs you have already paid and transfers the outstanding balance to Lender X. After the transfer is complete, you no longer owe anything to lender X and will repay the loan to lender Y under the new terms.

Eligibility for an auto loan balance transfer may vary by lender, but common criteria include:

• You must be at least 21 years old when applying

• Your age should not exceed 60 by the end of the loan tenure

• You must have a repayment history of at least 9 months for your current car loan (varies by lender)

• If a balance transfer can lower your loan costs, it is worth considering

Although the documents required may vary from lender to lender, you will typically need the following documents to transfer your auto loan:

• Loan summary from your current lender (outstanding principal, interest, and remaining tenure)

• Income proof (last 3 months' salary slips or income tax returns)

• Bank statements

• Identity and address proof

• KYC documents

• Passport-size photos

Here are the key points to consider when transferring your car loan:

• Review Loan Terms: Ensure the loan agreement permits transfers and that the associated fees align with your budget

• Find a Qualified Buyer: Confirm that the new owner is willing to take over both the loan and the car

• Verify Buyer’s Creditworthiness: The new borrower needs to have a strong credit score

• Update Vehicle Registration: Complete the ownership transfer at the RTO, along with the applicable fees

• Prepare Necessary Documents: Submit the required paperwork as per the lender’s guidelines

• Transfer Insurance Policy: Update the car insurance under the new owner’s name

• Understand Transfer Fees: Inquire about processing and transfer charges with your lender
  

Here are the steps to transfer an auto loan to another person: 

• Both the current owner and the new borrower need to agree to the transfer terms

• The new borrower needs to meet the lender’s eligibility criteria and apply for a vehicle loan

• Once the application is approved, the bank transfers the loan to the new borrower

• The new borrower becomes responsible for all future payments and the remaining loan balance

• The car’s ownership needs to be legally updated, and both parties have to complete the required paperwork
  

A top-up car loan is a convenient way to borrow additional funds on your existing car loan, making it ideal for those who need extra money for purposes such as home renovations, medical expenses, or other financial needs. 

For example, you already have a car loan of ₹10 Lakh with an EMI of ₹10,000, and the loan has been active for at least 9 months with a solid repayment history. You decide to apply for a top-up loan by submitting the required documents to the bank. 

The bank reviews your loan details, repayment history, and financial documents, followed by a credit check to assess your eligibility for the additional funds. Once approved, your original EMI of ₹10,000 remains unchanged. A new EMI for the top-up amount will be added based on the loan terms. This gives you access to additional funds without needing a new loan.

Here are a few tips to consider when transferring your car loan to a family member or friend:  

• Ensure the person can repay the loan

• Discuss the transfer with your lender

• Obtain lender approval for the process

• Have all the necessary documents ready

• Transfer car registration and insurance

• Check the applicable fees for the process

When transferring your Car Loan, consider the car's age and the loan tenure. Car Loans typically have a repayment period that needs to be adhered to. When the loan feels burdensome, a car loan balance transfer can assist in securing a lower interest rate.