- The loan is a legal contract between the lender and the person who purchased the vehicle and signed the loan agreement. That original buyer is responsible for making the payments on time. The title will transfer to him when the loan is paid off. If the new buyer takes possession of the vehicle and does not make payments in full on time, the original buyer's credit will be adversely affected and the original buyer retains responsibility for paying off the loan.
- If the lender allows loans to be assumed, the original buyer must contact the lender and identify himself with his personal information and loan number. The new buyer will then need to qualify for the loan, submitting his Social Security number, date of birth, and verification of employment and address. The lender will likely check the new buyer's credit. The new buyer will also need to provide evidence of insurance for the vehicle.
- The new buyer could take out a no-collateral, personal loan in the amount of the purchase price of the car. He would give the money to the original buyer, who would use it to pay off the existing loan and then transfer the vehicle to the new buyer.
- If the original buyer and the new buyer are friends, they could agree for the new buyer to take possession of the vehicle, have it insured and sign a contract to make regular payments to the original buyer. The original buyer would send these payments to the lender. At payoff, the lender transfers title to the original buyer who transfers title to the new buyer. All is well provided the new buyer makes all payments in full and on time. If the new buyer fails to pay and has possession of the vehicle, the original buyer is at risk of financial loss.
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