How to Transfer a Car Loan in Canada

Transferring a car loan is an alternative way of selling your vehicle. Be aware of your lender's terms, conditions and fees before agreeing to a loan transfer.

A car loan transfer allows you to hand your existing auto loan off to another person or lender.

This typically happens when a person sells or gives a financed vehicle to a person who’s willing to accept the car loan that’s attached to it. A car loan transfer may also be an option if you want to take advantage of the better rates or service offered by a different lender.

How to transfer a car loan to another person

If someone is interested in taking over your auto loan, here are the basic steps necessary to complete the loan transfer process:

Check your loan agreement. Before selling or giving away your car, check the details of your loan contract. Determine if there are any conditions or fees associated with transfer of the loan.
Have your documents in order. Any potential buyer willing to take on your loan will want to see the details first. Make sure you have all your loan documents available for the buyer to review things before deciding.
Agree on a price. When selling your vehicle, it’s important to know the current market value. You can do so by checking the websites of Kelley Blue Book, AutoTrader or CARFAX, for example.
Qualify the potential buyer with your lender. Even if the new buyer agrees to take on your loan, your lender will still need to qualify them. The potential buyer will need to meet requirements around minimum credit score, income and debt.
Complete the transfer. Once an agreement has been made, you and the buyer will need to submit paperwork to the lender to get the loan transferred. Contact your lender early on to find out what this might entail. Ensure the loan has been transferred before letting the new owner drive away with the vehicle.
Change the title of the vehicle. In addition to the loan, you’ll also need to transfer the vehicle’s title to the new owner.
Update your auto insurance. Be sure to contact your insurance provider when the transfer is complete, so you don’t pay insurance premiums for a vehicle you don’t own anymore.

How to transfer a car loan to another bank

If you want to keep your vehicle, but switch lenders, these are the basic steps involved:

Check your loan agreement. Some auto loans may charge a penalty if you pay off your loan early. You’ll want to ensure that any interest saved with a different lender is more than any fees you’ll have to pay.
Shop around. If you’re going to transfer your loan to another financial institution, you should check with various lenders to see what rates are available.
Get approved. Once you’ve settled on a lender, you’ll need to formally apply for the loan. Your new lender will have to qualify you by checking your income, credit score and current debt load.
Pay off your old loan. Once you have the funds available from your new lender, immediately pay off your loan from your previous lender. You’ll want to get it in writing that your loan has been paid off.
Make payments to your new loan. As with any type of loan, it’s imperative to make payments on time and in full. A portion of each monthly payment will go toward paying interest to the lender and reducing the principal balance. Setting up automatic payments can help you to avoid late or missed payment fees.

Reasons to transfer a car loan

Payments are no longer affordable. When the monthly payments become unmanageable, some people will consider selling their car to increase their cash flow. If a buyer agrees to take on the loan, it can provide instant debt relief.
The vehicle is no longer needed. Life circumstances for car owners may change where they no longer need access to a vehicle. Selling the car and transferring the auto loan would make things easier as it’s one less thing to worry about.
Lower rates are available. Sometimes, you may be able to find a better interest rate than what you’re currently paying. If this is the case, and you still want to keep your vehicle, it may make sense to switch to a new lender since it would save you money.
Breakdown in marriage. A jointly-owned car is an asset that’s likely to be affected by divorce or separation. If one partner wants to take the vehicle, an auto loan transfer may be required.
Gifting the car. Someone may decide to gift their car to a friend or family member with the simple condition that they take on the remaining loan payments.

Yes, it’s possible to transfer an existing car loan to a new lender. Such a move is sometimes known as a “car loan balance transfer.” To carry one out, you’ll have to meet your current lender’s terms and conditions, as well as the qualification requirements of the new lender.

Yes, it’s possible to transfer an auto loan to a person who is willing to continue making payments that are agreed upon in your current loan contract. The buyer will need to meet your lender’s current qualification requirements.

About the Authors

Clay Jarvis

Clay Jarvis is NerdWallet’s mortgage and real estate expert in Canada. Thus far, his entire professional writing career has revolved around real estate. Prior to joining NerdWallet, he was the…

Barry Choi

Barry Choi is a freelance personal finance and travel expert. His website moneywehave.com is one of Canada's most trusted sites when it comes to all things related to money and…