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Balance Transfer Car Loan: Complete Guide to Car Loan Transfer in India

By Tata Capital
15 January 2026
9 mins read
1770

Nisha Sharma is an IT professional who recently got promoted. Not only did her promotion come with a higher designation, but also a 20% hike in her salary. To celebrate her win, she finally bought her dream car after taking a vehicle loan from a lending institution.

As she started paying off her loan EMIs, she came across another lender willing to offer her the same loan amount but at a relatively lower interest rate. Can Nisha switch to this new lender, even though her paperwork has gone through with the old lending institution and she has also paid off a few EMIs?

Yes, she can! If Nisha opts for something called a car loan transfer.

If you’re paying high interest on your existing car loan, a car loan transfer, also known as a car loan balance transfer, can help reduce your financial burden. A car loan transfer allows you to shift the outstanding loan amount from your current lender to a new one offering better terms, such as a lower interest rate, longer tenure, or improved service. This can help you lower your monthly EMIs and reduce the overall cost of the loan.

But how does it work, and what steps do you need to follow? Let’s break it down for you.

Top Reasons for Car Loan Balance Transfer

A car loan balance transfer can be a smart financial move when your existing loan no longer fits your needs. Whether you are looking to reduce costs, improve cash flow, or restructure your repayments, a balance transfer car loan allows you to switch to a more suitable lender and loan structure.

Here are some of the key reasons why borrowers consider a car loan transfer to another person or lender:

Lower interest rates: Shifting to a lender offering better rates can reduce your overall interest payments and lower your monthly EMI.
More flexible repayment terms: You may get access to longer or more convenient tenures, helping you align repayments with your current financial situation.
Opportunity to repay faster: If your income has increased, you can move to a shorter tenure and close your loan sooner while saving on interest.
Loan consolidation: A balance transfer can help combine multiple vehicle-related liabilities into a single, easier-to-manage loan.
Better credit profile: Timely repayments on a new loan with improved terms can support gradual improvement in your credit score over time.

How to Transfer Car Loan Balance to a New Lender

Before acting upon an opportunity to transfer your car loan, be sure to read the following steps.

Step 1 – Check Ongoing Loan Terms

Read your present loan contract to check if it has any special norms regarding a car loan takeover. For starters, does your present lender even allow this procedure? You’ll find that most lenders don’t have any issues, but it never hurts to refer to your loan terms for more clarity.

If you can’t find anything related to a car loan takeover, call up your loan or relationship manager to clarify the terms, if any, before opting for this process.

Step 2 – Find a Suitable Lender

It may bode well to recce lenders peddling lower interest rates before checking your present lending institution’s terms and conditions on a car loan takeover. In fact, both step 1 and step 2 are interchangeable. Prioritise them at your convenience.

While finding a suitable lender, look for three things –

The interest rate they are willing to provide
Their processing fees
The penalties and hidden charges they levy

Keeping all three considerations in mind, choose the right lending institution.

Step 3 – Check Eligibility Criteria

Finding another lender providing a lower loan ROI is not enough. You must also check whether you fit their eligibility criteria. To do this, read their eligibility document and also talk to the institution’s representatives.

As a rule of thumb, you must also check your credit score at this point to boost your approval chances at the lowest possible interest rates.

Step 4 – Prepare Documentation

The last step before applying for a vehicle loan transfer is to thoroughly go through the document checklist. Doing this will expedite the entire process and ensure your transfer goes smoothly. The critical paperwork required for this transfer typically includes:

Proof of income
Proof of identity
Bank statements
KYC papers
Passport size photographs

How to Transfer Car Loan to Another Person

Imagine after a few years, Nisha wants to sell off her car, but she still is paying off her loan EMIs. In such a case, she can also transfer car loan to another person or buyer who is interested in her vehicle. She can also accept a lump sum amount from the new buyer and use the same to pay off her remaining loan. All of this will depend on the understanding between Nisha and the prospective buyer.

However, if Nisha chooses to transfer car loan to another person, here are a few things she and any other person in her situation must do:

Check the Prospective Buyer’s Credibility

If another person wants to buy your car by taking over your loan EMIs, they must have the same, if not better, credit rating as you. Keep in mind they are ultimately entering a loan contract with a lending institution, so they will properly vet the new buyer’s financial standing.

Change Car’s Registration

After finding a suitable buyer who passes the lending institution’s credit checks, it’s time to transfer the registration of the vehicle in their name. For this, both you and the new buyer will visit the RTO and file an application. The processing time can take up to two weeks. The RTO authorities will also conduct a background check with the lending institution before they alter the name on the registration certificate.

Transfer the Insurance

Transferring car loan to another person along with registration is not enough. You must also transfer the vehicle insurance policy to the new buyer’s name. This is not as challenging as you can simply reach out to your insurance provider, submit the documents they require and transfer the policy to the new buyer’s name.

And, voila, you’re done! Since there are quite a few steps involved in transferring a car loan to another person, many car owners go the dealer route. Here, they sell their vehicle to a certified car dealership, which takes care of all the documentation and transfer of insurance and registration.

Eligibility Criteria for Car Loan Takeover and Balance Transfer

Before applying for a balance transfer car loan or requesting a car loan transfer to another person, lenders assess a few standard eligibility parameters to ensure the repayment responsibility can be smoothly shifted without increasing risk. These criteria help financial institutions evaluate the borrower’s creditworthiness, income stability, and the vehicle’s legal and financial standing before approving the transfer.

Key eligibility requirements include:

Good credit profile: A healthy credit score and clean repayment history improve approval chances for a balance transfer car loan.
Stable income source: Salaried or self-employed applicants must show consistent income and repayment capacity.
Age eligibility: Applicants usually need to fall within the lender’s prescribed age bracket at loan maturity.
Vehicle condition: The car should meet age and valuation norms set by the new lender.
Clear documentation: Existing loan statements, RC copy, insurance, and ID/address proofs are required.
Consent from current lender: NOC from the existing bank or NBFC is mandatory for a smooth car loan transfer to another person.
Relationship validation (if applicable): In case of a car loan transfer to another person, the new borrower must fulfil all eligibility norms independently.

Meeting these conditions ensures a faster and hassle-free approval process.

Documentation Required for Car Loan Balance Transfer & Takeover

To process a balance transfer car loan or a car loan transfer to another person, lenders need a standard set of documents to verify identity, income, and repayment ability. Having these ready can help speed up approvals and avoid delays during evaluation.

Common documents required include:

Passport-sized photographs
Proof of identity (such as Aadhaar card, Passport, or Driving Licence)
Proof of residential address
PAN card and bank-specific KYC documents

For salaried applicants:

Salary slips for the last three months
Bank statements showing salary credit for the last three months

For self-employed applicants:

Balance sheet and profit & loss statements for the last three years
Business current account statements for the past six months
Personal savings account statements
TAN card, where applicable

Submitting accurate documentation ensures smoother processing for your balance transfer car loan or car loan transfer to another person request.

Key Benefits of Car Loan Balance Transfer in India

Features	Benefits
Lower Interest Rates	When you transfer car loan to another bank, it reduces your interest burden and total loan cost, helping you save significantly over the loan tenure
Extended Loan Tenure	A car loan transfer to other bank gives you more time to repay your loan, which can lower your monthly EMIs and ease financial stress.
Better Loan Terms	Enjoy reduced EMIs, improved service, or access to value-added benefits by switching to a more favourable lender.
Cost Savings	Availing a lower interest rate and better terms leads to reduced overall outgo, helping you manage finances more effectively.
Lower Processing Fees and Charges	With a car loan balance transfer, you can save money with a new lender that offers reduced processing fees, foreclosure charges, etc.
Improved Loan Features	When you do a car loan balance transfer, you can get access to benefits such as zero or minimal prepayment charges, quicker foreclosure, and more responsive customer support.
Flexible Repayment Options	Lastly, choose a lender that offers flexibility in repayment tenure. You can use this flexibility to reduce EMIs or prepay early if you have surplus funds.

Conclusion

A car loan transfer can be a smart financial decision if you’re looking to reduce your EMIs, lower your interest rate, or get access to better loan features. Whether you want to transfer the balance to another bank or hand over the loan to a new buyer, understanding the process, eligibility, and documentation involved is crucial.

Ensure you’re eligible, your documents are in order, and your new lender offers clear terms.Unhappy with your present lender, want to apply for a car loan transfer? Turn to Tata Capital! We extend vehicle loan transfer facility at competitive interest rates with minimal documentation and speedy processing.

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FAQs

What is the process that is followed by the lender once I apply for a car loan?

Once you apply for a car loan, the lender reviews your loan application and documents, checks your credit history, and verifies your income, employment, and other relevant details. If you meet all criteria, they approve and sanction your loan and disburse the loan amount to your bank account.

What is a car loan balance transfer?

A car loan balance transfer is a process where you transfer your existing car loan from one lender to another for lower interest rates, better loan terms, or additional benefits.

Do I need a guarantor to avail of a car loan balance transfer?

No, you don’t typically require a guarantor for a car loan balance transfer. However, if you don’t have a strong credit profile, you might need a guarantor to secure the loan.

After how long can I foreclose the loan?

The duration for foreclosing the loan depends on the lender’s policy and the loan terms. It typically ranges between 6 months and 1 year.

Does a car loan balance transfer hurt your credit?

A car loan balance transfer doesn’t hurt your credit if managed well. In fact, timely repayments with the new lender can improve your credit score over time.

What is a balance transfer car loan and how does it work?

A balance transfer car loan lets you shift your existing car loan to another lender offering better interest rates or terms, helping reduce EMI or overall repayment cost.

When is the right time to do a car loan balance transfer in India?

The right time is when interest rates drop, your credit score improves, or your current lender charges higher EMIs or restrictive prepayment or service fees.

Can I transfer my car loan to another person? What is the process?

Yes, you can request a car loan transfer to another person, subject to lender approval. The new borrower must meet eligibility criteria, submit documents, and sign revised loan agreements.

Will a car loan balance transfer affect my credit score?

A car loan balance transfer may cause a small, temporary dip due to a credit enquiry, but timely repayments on the new loan can help maintain or improve your credit score.

What are common charges and fees involved in car loan balance transfer?

Common charges include processing fees, foreclosure or prepayment charges from the existing lender, documentation charges, and sometimes valuation or verification fees during a car loan balance transfer.

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