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.
What is Vehicle Loan Transfer?
A vehicle loan transfer is a process of transferring your existing car loan’s balance from one lender to another. Borrowers usually do this for a lower interest rate. Either they hear about a lender with a lower rate and approach them, or the lender may cold call or receive references of borrowers from other sources.
Regardless of who approached whom, the new lender offering a lower interest rate pays off the old lender for a successful or NBFC. Once the switch takes place, the borrower starts paying their EMIs to the new lender at the adjusted interest rate.
The entire process of switching lending institutions usually goes smoothly, as long as you have chosen a credible lender.
Reasons to Opt for a Car Loan Transfer
Being on the receiving end of a lower interest rate is indeed the most important, but in no way, the only reason to transfer car loan to another bank. Here are a few more advantages of switching your car loan to another lender.
Lower Processing Fees and Charges
Often your loan processing fees and default and other charges vary from lender to lender. Therefore, it’s ideal to switch to a lender that offers the lowest processing fees, penalties and charges. Now, if you have already taken a loan, you can’t save on the processing charges.
However, if your new lender is willing to charge a lower processing fee, but more importantly, levies lower default penalties and foreclosure charges, transfer car loan to another bank. This will do you a tonne of good in the long run.
Improved Loan Features
Does your present lender allow prepayment without penalty? How flexible are they with repayment tenures? Is their customer service helpful? If you find another lender that levies zero or low prepayment charges, default penalties and have highly responsive customer service, a car loan transfer with them is worth it.
This is true even if they charge the same or only a slightly lower interest rate because you never know if and when in life you may end up with additional funds to prepay and foreclose your loan before time. And, when you do, you must have a lender who supports it rather than severely penalising this feat.
Flexible Repayment Terms
When easy prepayment is possible, the other end of the spectrum should also be true. This means that sometimes, a lending institution not only extends prepayment and quick foreclosure but also flexible tenures for borrowers who want to reduce their EMIs.
Therefore, transferring a car loan to another bank also helps if you want to reduce your monthly instalment load by allowing you to extend the tenure mid-payments.
Detailed Steps on Transferring Car Loan to Another Bank
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 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.
In the End
We hope we have answered your questions on can car loan be transferred to another bank and how to transfer car loan to another person. The answer to both questions is yes!
Unhappy with your present lender, want to apply for a vehicle loan transfer? Turn to Tata Capital! We extend vehicle loan transfer facility at competitive interest rates with minimal documentation and speedy processing.
Visit our website to know more!