Have you ever applied for a Car Loan only to find out that there are other Car Loans out there that are more suitable to your financial needs and requirements? While you may rue your decision, you’ll be glad to know that it isn’t too late to make amends.
A Car Loan transfer could be your way out of your current predicament. Banks all over the country offer the facility to transfer your current Car Loan to another bank or lender. This could be a financial lifesaver, especially if you happened to overlook the terms and conditions of your current loan after signing on the dotted line, and then realising it isn’t exactly the right one for you.
Additional Reading: 7 Things To Consider Before Applying For A Car Loan
There are many reasons why you may want to transfer your loan to another bank or financer, such as a change in earning capacity,high-interestt rates, etc. Transferring your loan could help you take stock of all your outstanding dues, EMIs and other debts, and could also help you budget and plan according to the financial position you currently find yourself in.
While a Car Loan transfer can be extremely advantageous, especially when it comes to clearing large EMIs and saving interest, this service usually comes for a fee. Therefore, it would be in your best interest to make sure that opting for a transfer is financially viable for you.
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How Does A Car Loan Transfer Work?
It’s pretty simple! If you’ve taken out a Car Loan from one bank, but you find that another bank or lender is offering you a much better deal in terms of interest for example, then you can opt to transfer your loan.
The new lender you’ve chosen will clear your previous loan, while you resume making repayments for the Car Loan with your new lender under conditions better suited to you. If you happen to get a lower rate of interest from your new lender, you could pay out your loan faster since your EMIs would reduce accordingly.
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How To Get The Best Car Loan Transfer Possible?
If you think you could get yourself a better loan deal with another bank, then here’s what you need to do:
- Go Shopping
To ensure you get the best deal possible, you need to get all the information you possibly can about other Car Loans available in the market.
It is imperative that you do your research beforehand in order to find out whether you can transfer your current Car Loan to the bank that you’ve zeroed in on. Also, make sure you find out about interest rates, fees and any other important factors that will impact your decision.
You could talk to your current bank or lender and see if they could give you a better deal. If not, then make sure you gather all the information you can from your current lender regarding your loan (eg: tenure, interest rate etc) and compare it with other lenders to see if transferring your loan really is worth your time.
- Calculate Your EMIs
Before opting for a Car Loan transfer, take some time out to calculate how much you would actually save if you went through with it. This can be easily done with the help of a Car Loan EMI calculator.
Make sure you determine every single detail about your current Car Loan such the remaining duration of the loan, the principal amount and the interest rate. More often than not, transferring your Car Loan after 1 year is the most viable option since it will help you save on a substantial amount of interest. However, transferring your Car Loan after a period of 2 years may not be particularly beneficial to you, especially after taking the balance transfer fees into consideration.
This is due to the fact that banks charge a large chunk of the interest payment during the initial stages of the loan. In other words, the interest component of your EMI at the beginning of your loan is much higher than the principal component, which tends to increase during the final stages of your loan.
Additional Reading: Your Car Loan EMI Calculator Guide
What Are The Documents Required For A Car Loan Transfer?
In order to apply for a Car Loan transfer, you will be required to submit the following documents to the bank that you wish to transfer your current loan to:
- Two photographs
- Proof of identity
- Proof of address
- KYC documents required by the bank you’re transferring the loan to
- If you are a salaried individual:
- Previous 3 month’s salary slips
- Previous 3 month’s bank statement (to which the salary is credited)
- PAN card
- If you are self-employed
- Balance sheet and Profit and Loss statements of the previous 3 years
- Current account statements of the business for the previous 6 months
- Savings account statements
- TAN card
Car Loan Transfer Process
While the process of transferring a Car Loan may differ from one bank to another, it’s likely that one of the following procedures will take place:
- The new bank you’ve chosen to transfer your loan to will credit the remaining loan amount to your account, which will enable you to clear your previous loan completely.
- The new bank you’ve chosen will write a cheque or issue a demand draft favouring your previous bank or lender. Make sure you have all the relevant details with regard to who the cheque should be made out to.
- The new bank you’ve chosen to transfer your loan to will co-ordinate with your previous bank with regard to clearing your loan.
Remember that from July 1st 2017 GST of 18% is applicable on all banking services and products.
Additional Reading: How To Get The Real Cost Of Ownership For Your Car
Transfer Of Car Loan To Another Person
If you happen to find yourself in a situation where you’re unable to make repayments towards your Car Loan and you’re looking to sell the vehicle, there could be a way to get yourself out of this particular predicament.
While the most advisable route would be to prepay your existing Car Loan and then sell the car, you could opt to transfer your loan to another person if you find that you are unable to pay your loan EMIs.
Additional Reading: Conditions To Prepay Your Car Loan
In order to transfer your Car Loan to someone else, you will need to cede ownership of the vehicle to this person. Banks may let you do this provided you fulfil certain conditions.
In any case, if you do opt to transfer your loan to another person, you will need to follow the procedure outlined below:
Go Through Your Loan Documents
Make sure you check your loan documents before opting for a transfer. Your loan agreement should state in no uncertain terms that a loan transfer to another person is possible.
If you’re unsure about this, get in touch with your bank to clarify any doubts you may have. Keep in mind that a loan transfer may be nigh on impossible if your bank has explicitly made it clear that a transfer is not allowed.
Offer A Good Deal
More often than not, people tend to baulk at taking on someone else’s loan. This is why it is imperative that you find someone who will agree to take on your loan as well ownership of the vehicle. Decide on a reasonable price that works for both you and the buyer when selling your car. The buyer might expect a drop in the price of the car as you’re also transferring the loan.
Of course, all this mainly depends on factors like the remaining loan tenure, as well as the loan amount you’ve already paid off.
Make sure that the person to whom you’re transferring your Car Loan has a similar or a healthier credit rating when compared to you. Transferring to a person who is a serial loan defaulter is a definite no-no since this person will be required to submit relevant documents to the bank in order for the transfer to go through.
Always ensure that the person who has agreed to take on your loan earns a regular income and has a penchant for clearing debts on time.
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Try getting in touch with a car dealership if you cannot find someone to transfer the loan to. Since car dealers deal with people who are always looking to purchase used cars, there’s every chance you could go through one of them to find someone who would be willing to take on your loan as well as ownership of your car.
Once you’ve identified someone to transfer your Car Loan to, you will also have to transfer the car registration to this person along with the loan documents. To do this, you will have to notify the nearest RTO (Regional Transportation Office), who will then make sure that the ownership of the car is transferred to the person willing to buy your vehicle.
The entire procedure may take a couple of weeks at best, during which thorough background checks will be carried out by the authorities concerned in tandem with the bank. This must be done before any changes are made to the certificate of registration.
It doesn’t end there though. You will also have to get your Car Insurance provider to transfer the Car Insurance policy to the new borrower. Getting consent is necessary to ensure you don’t pay any unnecessary premium charges, which the new borrower will be required to pay.
The following documents will be required to be submitted by the new borrower:
- A request form for the transfer of the loan to the new borrower’s name
- Proof of identity
- Proof of address
- Proof of income
- Any other documentation required by the bank
There is a chance that banks may levy certain fees or charges when you go ahead with a Car Loan transfer. These fees may differ depending on how much longer the loan has to run for, or the loan amount left to be repaid. Make sure you consult with your bank in advance regarding any loan transfer charges.
Additional Reading: How To Switch Car Insurance Providers And Manage A Lapsed Policy
To summarise, make sure you follow these steps for a successful Car Loan transfer:
- Prior to opting for a Car Loan transfer, make sure you attain consent from your bank
- Make sure you identify a buyer/borrower with a good credit standing
- Initiate registration and insurance transfer only if your bank has consented to the transfer
- Make sure that you have transferred vehicle ownership to the new borrower
- Remember that you will be liable for any damages that the car may suffer during transfer
- Ensure that the vehicle is safe and secure until the transfer goes through
Additional Reading: How To Make Smart Financial Decisions When Buying A Car
That should be all you need to know about transferring your Car Loan. Remember to always gather as much information as you possibly can before opting for a loan transfer so that you don’t end up in a financially worse position than you were in prior to the transfer.
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