Owning an automobile is a dream that is wrapped around our heads for as long as we can remember. The experience of buying and ownership is indeed unique to each individual, however, there does come a time when every individual must let go of their vehicle. This can be due to various factors like the cost of running, hectic maintenance, age or even lack of interest in them anymore. However, for people who have a car loan that is not paid off, it could become an ordeal to sell their vehicle.
Although there exists an option to transfer a car loan, the process is not as simple as one might assume. It is a cumbersome process that requires time, patience and most importantly a creditworthy borrower. One would also require to transfer the registration of the car and insurance to the new borrower. Also, it is important to keep an account of the costs associated with a car loan transfer as banks do seek processing charges in addition to the car registration transfer fees and insurance transfer fees. These charges may become an unviable proposition as the buyer is faced with the burden of paying these charges. The buyer could even propose to share the chargers with the seller.
Therefore, it is important to note the following aspects to have a smooth car loan transfer:
First and foremost, it is important to go through the loan agreement details. It is recommended to read the loan agreement completely to know whether a loan transfer is possible in the first place. The car loan contract must allow a third-party transfer for everything to go smooth and slick. Hence, it is advised to go through the document completely. However, if it is difficult to find the details, try contacting the lender who provided the loan, for acquiring further information.
It is important for the seller to find a car buyer who has maintained a credit score that is approved by the bank and passes all the eligibility criteria for the transaction to be approved. The eligibility criteria include the basic information of the buyer that proves the individual to be above 18 or of the legal age to oblige in a transaction.
Once the aforementioned aspects are correct and good to go, the buyer must present supporting documents in the form that provides details to the bank regarding income, proof of residence etc. Further, the bank will conduct a credit appraisal of the buyer and sanction a loan only if it finds the credit score and history of the buyer to be satisfactory.
Note: The bank will also ask for KYC documents of the buyer as per their requirement.
Once the bank approves the transfer, the current owner has to transfer the registration certificate of the vehicle as well as the loan to the buyer. The process is initiated at the RTO or Regional Transportation Office. The RTO will assist in transferring the ownership of the vehicle to the buyer. Do take note that there are charges for the transfer of registration and change of ownership.
Further, a background check, as well as verification of documents, are conducted by the lender to see if the submitted data is correct. Once the documentation process is concluded from the lender's side, the registration certificate is provided in the name of the buyer.
Note: The car ownership transfer cost differs from each RTO. It may cost from Rs.300 to Rs.2000 (approximate figures).
The next step is transferring the insurance policy to the name of the buyer. Obviously, this is done to ensure that the one selling does not need to pay the premium amount after transferring ownership of the car. Now, to transfer the insurance premium to the buyer, submit all the required documents to the insurer or underwriter such as the registration certificate copy and the loan documents that are updated.
Once the aforementioned is done, the insurer will verify the documents and approve if the provided documents meet the requirements.
As per the current rule, used car buyers must apply for a used car loan however, do keep in mind that the interest rate which is to be paid is more than the interest rate to be paid for a new car. Also, a maximum tenure of 5 years is provided to the buyer to completely pay off the loan. As for the used car loan, the buyer can start paying the EMI as soon as the seller transfers the loan to the name of the buyer.
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