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Can a loan be transferred to another person?

A loan can be transferred to another person under certain circumstances. However, you won’t be able to transfer a personal loan. This is because the lender will have taken your specific financial circumstances into account before agreeing to lend you the money.

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Is it possible to transfer a personal loan to someone else?

If you’re looking for information on how to transfer a personal loan to another person you may find it difficult to find answers. This is because it’s unlikely you’ll be able to transfer your personal loan.

Personal loans are offered to individuals based on their credit rating and how likely the lender thinks they’ll make their payments on time and in full. The interest rate and amount offered are specific to that person’s financial history.

Transferring a personal loan to somebody else would mean the lender potentially changing the terms and conditions of the loan to suit the new borrower’s circumstances. For this reason, lenders don’t tend to let personal loans be transferred between people.

Which loans can be transferred to another person?

The only types of loans which can be transferred are:

  • Car finance - either to the same lender or a new one - if the terms and conditions of your loan allow for this
  • Mortgages - if you want to add or remove somebody from the mortgage

How to transfer mortgages

You may wish to transfer your mortgage because you’re selling your house or have a joint mortgage and one party wishes to remove their share. Here’s the three ways that you can transfer your mortgage:

1. You’re selling your house

If you’re selling your house and haven’t paid the mortgage off fully, then you can transfer your mortgage to someone else. They’ll either take over mortgage with your current lender or use a new lender to pay your old lender off. Either way you’ll be repaid the amount you’ve paid for the property by your mortgage lender.

If you wish to sell your house and haven’t paid off your mortgage you should speak to your lender – they’ll be able to advise you on the terms and conditions of transferring your mortgage.

2. You have a joint mortgage and wish to sell your share 

This can get a little tricky. Transferring a mortgage from a joint to solo ownership is called a transfer of equity. It is possible to do this if the lender believes that the person wanting to take on the mortgage will be able to make the repayments on time and in full. A mortgage broker might be able to help renegotiate for a longer payment schedule that suits the new borrower’s finances, or help them find an alternative lender.

3. You want to remove your own name from a joint mortgage 

You can remove your own name from a joint mortgage with a transfer of equity. If the other person (or people) responsible for the mortgage don’t want to buy you out, there are other options:

You can suggest that you all leave the property and rent it out, or sell either your share or all shares of the property to a new buyer. Again, you might want to consult a mortgage broker to find a new lender, or renegotiate the payment schedule.

How to transfer car finance

You may wish to transfer car finance if you’re looking to sell your car and haven’t paid it off yet. There are two ways you can do this:

1. Use a different lender

The person taking over your car finance will take out a loan with the new lender, who will pay off your current lender for the car. Then the car will belong to the new lender until the new borrower has made their repayments. You will no longer be financially responsible for the car.

This option may be the best one for the new borrower because they will have a lower amount to pay off - and potentially a lower interest rate. However, it will affect your credit score negatively, so it might not be the best option for you.

2. Use the same lender

In this case the person wishing to buy your car takes over the existing loan and makes the rest of the repayments. Again, you’re no longer responsible for the repayments. This will damage your credit score less than using a different lender, but it will leave a footprint on the new borrower’s credit history, possibly affecting it negatively. 

If you transfer your car finance, it’s unlikely you’ll get back all the money you’ve already spent on the car. You’d have to sell it for the amount you originally agreed to pay, which probably won’t happen because cars decrease in value over time. You may also be restricted to selling the car for the amount you have left to repay due to the terms and conditions of your loan.

Defaulting on a loan can have serious consequences. Your credit score will be damaged, making it difficult for you to be approved for credit in the future. 

What happens if you can’t repay a loan?

If you think you’re going to miss a payment, contact your lender straight away to let them know you’re struggling because the may be able to help.

Late or missed payments will damage your credit score and negative markers will stay on your credit report for six years, which may affect your ability to borrow in the future. If you don’t make payments even after the lender has chased you extensively, then they can take legal action against you.

What support is available if you’re struggling?

If you’re struggling to make repayments on your loan you can speak to the lender about making the repayments more manageable. Just remember that lower payments will mean that you’ll be paying them back for longer and it will impact your credit score. If your worried about your finances you can seek free, confidential debt advice.

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