Can loans be transferred to another person?
Normally, loans cannot be transferred to another person, especially personal loans. This is because personal loans are determined on a number of individual factors such as your credit score. However, under certain circumstances car loans and mortgages can be transferred to another person.
Transferring a mortgage to a new borrower
Not all mortgages can be transferred. For a start, the new borrower must be able to qualify for the original loan and must have a credit score equal to or greater than the original borrower(s). The mortgage must also be ‘assumable’, which means the loan agreement allows for the debt to be transferred to another person. Assumable mortgages are rare as it is difficult to qualify for them.
Rather than transfer a mortgage, many borrowers instead choose to start a new loan. They can then use this new loan to pay off the existing mortgage debt.
Transferring a car loan to a new borrower
Car loans are the easiest loan to transfer to another person. If the new borrower qualifies for the original loan, then the lender can agree to transfer the loan into their name. This method will cost you less in penalties but does require the new borrowers credit score to be assessed.
The new borrower may wish to get a new car loan from a different lender. In this case, the new lender will pay off the original loan and the new borrower will benefit from lower payments and a shorter repayment period. This method may cost the original borrower more though.