A reader asked:
I got a car loan last September because I had better credit than my partner. She has been paying it off since the start by transferring the money to my bank account.
Now the question is, would it be possible to transfer the loan to my partner so it’s completely in her name? And if so would it move off my credit report?
You can’t “transfer” a loan
The simple answer is No. There is no way for you to transfer this loan to your partner. This applies to any loan, not just to car finance.
A loan is a legal agreement between you and the lender. It was at a good interest rate because of your good credit score. The lender wouldn’t have given your partner the loan at that rate last year.
You can’t tell the lender “From here on I’m not liable to repay you, my partner will instead.” The fact that your partner has made all the repayments is, I am afraid, not going to impress the lender.
You are going to have to carry on paying this loan, unless you can settle it. A transfer isn’t possible.
Settling the loan
You can ask the lender for a quote for an early settlement. Here the interest on the loan is reduced because you are paying it now. But a lender is allowed to add some extra interest – four weeks is common – so you may not think it is cheap.
You can do this just to find out what it would be – you don’t have to go ahead with the settlement, you can carry on with the loan.
The settlement amount will be valid for 28 days. That will give time for your partner to see if they can get a loan for that amount. The new loan can come from anyone, it doesn’t have to come from the same lender your loan is from.
If they can get a loan, you use the money from this to settle your outstanding loan.
Your loan will then show as settled on your credit record which should make it easier for you to get more credit, if that’s why you want to do this.
Is your partner’s credit record good enough?
This is only going to work if your partner’s credit has improved in the last eight months so they could now get a loan at a reasonable rate.
For many people that may not be realistic. But sometimes a credit record can improve a lot in a short time, for example if a bankruptcy or IVA marker drops off their credit record.
One possibility if this won’t work now is to look again after another year. At that point, the settlement amount will have reduced so the new loan would be smaller and perhaps your partner’s credit score will have improved more.
An alternative if the car isn’t needed
So far what I have written applies to any loan, not just to car finance.
But there is one extra possibility if the car finance agreement is Hire Purchase (HP). This includes Personal Contract Purchase (PCP), which is a common type of HP where you have to make a big payment at the end to own the car.
Here if your partner doesn’t want this car any more, you can decide to hand back the car and pay less than the normal settlement amount. This is called voluntary termination, see How to VT a car for details about how to do this.
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Andrea72 says
Can I take out finance on a car but the payments be taken from my partners bank?
Sara (Debt Camel) says
You will have to talk to the finance company about it, but I doubt it would be a problem.
Selina says
Hello
I am not sure if this is the right place and please correct me if i an wrong, I have a hire purchase agreement that was taken out in 2017 and ends 2021. When the agreement ends in 2021 (no defaults, late payments etc) when will this fall off my credit file? Is it 6 years from the date the agreement started or 6 years from the date the agreement ends and is paid off in full?
Many thanks for advice you can give.
Sara (Debt Camel) says
6 years from the date it ends.
Ella says
One possibility if this won’t work now is to look again after another year. At that point, the settlement amount will have reduced so the new loan would be smaller and perhaps your partner’s credit score will have improved more.
Kim says
If my car finance agreement is in my name, but it is actually my partner’s car – he has been paying for it – however, we are now separated and I cannot afford to take over payments so my partner is still paying for it. There are 3.5 years left to pay and we want to make an ‘official’ document to ensure he continues to pay it – and so that at the end of the finance term it will be legally his, how do we go about drawing up a legal document like this?
Sara (Debt Camel) says
You can make any agreement you want between yourselves, but it will make no difference to the finance company. If he wants to keep the car, he needs to carry on paying for it otherwise you just tell the car finance firm to repossess the car…
Kim says
I’ve been advised that they will auction car and I will be left with the balance to pay? Trying to avoid this and do the sensible thing meantime and thought some sort of written document would be of benefit to us both, but I’m not sure how to go about it? Basically something saying what he has to pay and by when each month and for how long – after which it will be his – is this even possible?
Sara (Debt Camel) says
“I’ve been advised that they will auction car and I will be left with the balance to pay? “
This is what someone has said will happen if he doesn’t pay?
Is this HP or PCP with a balloon payment on the end?
Are you theoretically worried or do you think he wants the car?
Could you make the payments if you wanted to? Or is this loan unaffordable?
Kim says
It’s HP and yes, he wants the car and I can’t afford the payments if anything happens between us – it makes it easier if he pays but he’s also concerned that he’s paying this money but the car is still In my name.. it’s all a bit messy.
Sara (Debt Camel) says
ok so what happens if this goes wrong:
With an HP agreement there is a halfway point – after that you can Voluntarily Terminate the agreement and not owe any more money. Before the halfway point you can voluntarily terminate the agreement and only owe the remaining payments up to the half way point. If he has the car at the time, you VT it, you need to inform him that he needs to hand it over to the car finance people or you will infomr the police that he is driving the car without your consent.
Until the agreement finishes – either by being paid or by being terminated, I am afraid you two are very much linked together and trusting each other. You are trusting him to keep paying. He is trusting you to transfer ownership of the car at the end. You can write this out in an agreement between you, but realistically if things go wrong it will probably because one of you has no money so the value of any agreement isn’t a lot.
the quickest way to cut the tie between you would be to VT the car at the half way point and for him to plan to get another car at that point. But that may be expensive for him and if you can both grit your teeth and work through the uncertainty and keep each other informed, then that would be a better option.
Kim says
That clarifies everything, thank you so much for all your help.
Wells says
Can you tell me if my husband has car finance and we separate can he make me pay it as we were married?
Sara (Debt Camel) says
This finance was only in your husband’s name? Who will keep the car?