People choose to refinance their car to change the terms of their loan- they may want to extend the length of their loan to lower their monthly payments. And if you are one of the many who want to refinance their car loan, there are several ways to do it.
Transfer a car loan by selling it
When looking for the easiest way to refinance your vehicle- sell the car. Selling your car is the right option if you no longer want the car or want to remove yourself from any car payments.
The person willing to take over the car loan should get a private party auto loan or a personal loan and use that specific loan to pay for the car from you.
You may try to sell your vehicle for more than what it's worth to make a profit.
Refinance with another person as a co-signer
If you can't sell the car, there's another option of transferring the car loan to another person. You can refinance the loan with another person as a co-signer. By giving them co-owner rights, they will be responsible for making the payments on the loan if you can't. This can be a good option if you have someone willing and able to help you out. On-time payments can positively affect your credit score, whereas late payments negatively affect your credit score. When you apply for a loan, the issuer will look into your and the co-signers to-be credit scores, the income of both (you and the co-signer), consider the car, and how much you own on the car loan. If you qualify, the only thing left you can do is to sign the loan and put the co-signer's name next to yours on the new loan.
Refinance with another person, then refinance again by keeping the co-signer but excluding you from the loan
Another option for a person to take over car payments is to refinance the loan with another person and then refinance again by keeping the co-signer but excluding you from the loan. But this option might be more complex than the others. For example, there is a chance that the lender will not approve the loan application if little time has passed since the vehicle's last refinance or if the person applying for a loan has a low credit score or low income. However, this can be a good option if you're trying to get rid of the car but don't want to damage your credit by defaulting on the loan.
Refinance alone
If you're confident in your ability to make the payments on the loan and transferring a car loan to another person doesn't seem like a good option, you can also refinance the loan alone. This can be a good option if you have good credit, want a lower interest rate, and want to keep your vehicle. For example, if you have positive equity in your auto rather than negative equity on your car loan, you may qualify for a lower APR. Also, you may get a lower interest rate if your credit score and income drastically improve since you got the car loan.
How does auto refinance companies let you change borrowers?
If you are wondering whether there are any auto refinance companies that let you change borrowers and how the financial deal and interest rates depend on an applicant's credit score, we got an idea.
Can you swap names?
Can you transfer a car loan to someone else, and that would be it? In an ideal world, things wouldn't be so complicated, but in the real world, unfortunately, you cannot just swap one person's name out for another.
Swapping names is impossible because interest rates and financial deals depend highly on the applicant's credit score, which we'll discuss in a minute.
How financial deals and interest rates depend on an applicant's credit score
Your credit score is one of the most significant factors in determining your financial deals. In addition, a good credit score makes you more likely to qualify for a lower interest rate.
The question of what constitutes a high credit score when seeking the best financial offers has puzzled experts for decades. While you have a strong credit history and a good credit score, the question remains "what qualifies as a high credit rating while looking for the greatest financial deals."
Most auto lenders use FICO Auto Scores that help them determine whether they'll approve financing and set a lower interest rate. Usually, it would be best if you had a credit score of 650 and above to get a better financial deal. So, paying off someone else's car loan is more complex than it sounds.
On a side note, bad credit doesn't exclude you from enjoying the financing advantages refinance offers. Even if you have bad credit, you may still be able to qualify for a loan, but it will likely have a higher interest rate. So if you want to refinance with a bad credit loan, look after the interest rate and ensure that it is slightly lower than the original loan.
All in all, the applicant's credit score impacts getting the current best financial deals.
Related: Can I Get A Second Car Loan If I Already Have One?
Bottom line
Most autos refinance companies don't just allow you to change the borrower. Instead, finding a few other options on how to refinance a car in someone else's name would be best. In short, you can refinance a vehicle on someone else by either selling the car, transferring the loan to another person, or refinancing the loan alone.
