How To Transfer a Car Loan to Another Person- A Step-by-Step Guide

Rahul Jha
Rahul Jha

Updated on: 4th January, 2024 IST

Transfer a Car Loan to Another Person

Are you looking to get a new car but stuck with an existing auto loan? In this blog, we'll guide you through the process of transferring your car loan to another person.

Imagine this: You've got your eye on a shiny new ride, but there's still an ongoing car loan for your current vehicle. That's where the magic of car loan ownership transfer comes in. Yes, it's possible to hand over the reins of your vehicle's loan to someone else.

The usual solution is to repay the loan before selling the car. But what if that's not doable upfront? Enter the option to transfer the loan to another individual.

Wondering about how to transfer an auto loan? Don't worry, we've got you covered. From understanding the car loan process to mastering the steps for transferring the vehicle loan to someone else, we've got the answers you need.

Transferring Your Car Loan: A Step-by-Step Guide

Transferring a car loan involves multiple steps, from ensuring the new borrower's credibility to transferring registration and insurance. By following these steps and communicating effectively with your bank, you can successfully navigate the car loan transfer process in India. 

Remember, each bank might have its requirements, so be sure to stay informed and well-prepared throughout the process. The process might seem overwhelming, but here's a breakdown of how you can transfer your car loan in India:

Step 1. Check Your Loan Agreement

  • Review your loan documents to see if a loan transfer is an option
  • Reach out to your bank if you're unsure
  • Some loans might not be transferable

Step 2. Find a Willing New Borrower

  • Look for someone ready to take over both the loan and car ownership
  • Research used car rates to set a competitive price
  • Remember, selling with the loan included might lower the car's price

Step 3.  Assess the Borrower's Credibility

  • Ensure the new borrower has a stable income and a good credit score
  • Their credit history should reflect responsible loan and debt repayment

Step 4. Consider Car Dealerships

  • If finding a buyer is tough, explore car dealerships for potential buyers
  • Dealers often have connections for purchasing used vehicles

Step 5. Transfer Car Registration

  • Don't just focus on loan documents; also transfer car registration
  • Visit the Regional Transportation Office (RTO) to initiate this process
  • Be patient, as it might take up to two weeks for completion

Read More: RTO Vehicle Registration Details by Number Plate

Step 6. Insurance Considerations

  • The new borrower needs to meet insurance requirements
  • Coordinate with your car insurance provider to transfer the policy
  • Submit bank documents to the insurer for necessary changes
  • This prevents you from paying unnecessary premiums

Step 7. Submit Required Documents

  • ID proof
  • Address proof
  • Proof of income
  • Loan transfer request form
  • Additional documents (if requested by the bank)

Step 8. Account for Charges

  • Banks may impose processing and transfer fees
  • These charges vary based on remaining tenure and principal amount
  • Inquire with your lender to understand the associated costs

Charges for Transferring Your Car Loan

The charges involved in transferring a car loan in India can vary depending on the lender, the state, and the amount of the loan. It is important to carefully consider all of the costs involved before transferring a car loan.

Here is a breakdown of some of the most common charges involved in transferring a car loan in India:

1.  Loan Transfer Fees

  • The loan transfer fees are charged by the lending bank to process the loan transfer request
  • This is typically non-refundable, even if the loan transfer is not completed
  • The amount of the loan transfer fees varies from bank to bank, but it is typically between ₹500 and ₹1,000

2. Stamp Duty

  • Stamp duty is a government tax that is charged on the transfer of property, including cars
  • The amount of stamp duty payable varies from state to state, but it is usually between 3% and 5% of the loan amount

3. RTO Charges

  • The RTO charges are levied by the Regional Transport Office (RTO) for transferring the ownership of the car
  • The amount of RTO charges varies from state to state, but it is typically between ₹300 and ₹500

Also Read: RTO Charges for Registering a Car

4. Other Charges

  • In addition to the above fees, there may be other charges associated with transferring a car loan
  • This may include the legal fees, the processing fees for the new loan, and the insurance premium

The following table summarises the charges involved in transferring a car loan in India:

Loan Transfer FeesCharged by the lending bank to process the loan transfer request₹500-₹1,000
Stamp DutyGovernment tax charged on the transfer of property3%-5%(of the loan amount)
RTO ChargesLevied by the RTO for transferring the ownership of the car₹300-₹500
Legal FeesCharged by a lawyer for drafting and processing the necessary documentsVaries
Processing Fees for the New LoanCharged by the new lending bank to process the loanVaries
Insurance PremiumPremium payable for the new insurance policyVaries

Tips for Transferring a Car Loan to Another Person

Remember that the process might vary depending on your specific situation, so consulting with professionals or experts is always a good idea. However, here are some useful tips for transferring a car loan in India:

  • Before starting the loan transfer, seek approval from your bank to ensure the process is feasible
  • Find a buyer who meets your bank's eligibility criteria or explore options with car dealerships
  • After bank approval, check with the RTO and insurance provider to ensure the transfer can proceed
  • Once confirmed, obtain consent from your lender to initiate the ownership transfer
  • Ensure proper transfer of ownership through required legal processes to avoid any complications later
  • Transfer the car's insurance policy to the new owner to maintain continuous coverage
  • Before and after the transfer process, thoroughly inspect the car for any damage to avoid disputes
  • Keep the car in good condition during the transfer process to avoid complications
  • Settle any pending dues, such as pending EMIs or taxes, before the transfer
  • Fill out all required forms accurately and submit them to the appropriate authorities
  • Inform local traffic authorities about the change in ownership to update records
  • Notify your insurance provider about the transfer and update the policy with the new owner's details
  • Ensure the buyer doesn't have any outstanding loans in their name, which could impact the transfer
  • Create a detailed agreement with the buyer, outlining the terms and conditions of the sale

The Bottom Line

As we conclude this blog, remember that preparation and communication are your allies. Seek your bank's green light before diving in, secure a suitable buyer, and ensure all legalities are covered. By following the steps meticulously—from confirming transfer feasibility to transferring ownership and insurance—you'll sail through the process in no time! 


Q. Is it possible to prepay or foreclose the car loan?

Yes, it's possible to prepay or foreclose a car loan in India. Most banks allow prepayment after a certain period, often with a nominal fee.

Q. What are the requirements to transfer a car loan?

To transfer a car loan, you need the lender's consent, a suitable buyer meeting eligibility criteria, proper ownership transfer, and updated insurance.

Q. What are the benefits of transferring a car loan?

Benefits of transferring a car loan include passing on the loan burden, potentially getting better loan terms, and simplifying the selling process.

Q. What are the risks of transferring a car loan?

Risks include the new borrower defaulting, which might still hold you accountable, impacting your credit score.

Q. How much does it cost to transfer a car loan?

The cost to transfer a car loan can vary for different banks but usually involves processing fees and documentation charges.

Q. What happens if the new borrower defaults on the loan?

If the new borrower defaults, you might need to continue payments to avoid credit damage.

Q. What are the legal implications of transferring a car loan?

The legal implications involve proper transfer procedures to avoid future disputes.

Q. How do I find a suitable borrower for my car loan?

To find a suitable borrower, explore local dealerships, online platforms, or personal connections.

Q. What are the best ways to sell a car with an ongoing loan?

Some of the best ways to sell a car with a loan include settling dues before the sale or transferring the loan with proper documentation while ensuring the buyer's financial credibility.

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