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Are Auto Loans Assumable?

Auto loans, like other loans, cannot be assumed. Many people use the term ”assume the loan” to mean having someone they trust take over the payments. That is not actually an assumption of the original auto loan, but a very risky matter of trust. It is better to have a potential buyer finance the car on their own, relieving you of the responsibility of the loan.

Taking Over Payments

On occasion, a borrower may find themselves unable or unwilling to continue paying for an auto loan, so they begin to look for someone to take over the payments. Since lenders do not really care who makes the payment on a loan, it is simple enough to find a trustworthy person and let them make the payments. However, the original borrower will remain responsible for the loan. If the other party stops paying for the loan, then the lender will start repossession proceedings against the original borrower.

Even if the person who begins making the payments for the original borrower pays on a regular basis, there is the problem of how to pay for insurance and license plates. The car will have to remain in the name of the original borrower, so the second party involved will not be able to have insurance in their on name. The last issue will be when the loan is paid off. The original borrower will need to transfer the title to the second party once the lien has been cleared.

The best option is to sell the car directly to the person you are thinking about having assume the loan payments. The process is very simple, but can be time consuming. Contact your lender about their process to clear the title. Once you know how long it will take, then you can start the sale process. You will have to be clear with the potential buyer, explaining that you will need time to clear the title with the proceeds of the sale. In some states, the new owner can get a temporary tag for 30 days, while the title clears. Check with your state motor vehicle bureau to be sure.