If you don’t have the wherewithal to buy a used car directly from a private seller, having someone else pay your loan may be an option. However, taking over the installments for a used car is complicated and in certain cases it may not be possible.
Steps to take out a car loan when buying a used car
Before you take out a car loan, you should make sure it’s the right option for you. You’ll have to go through the original lender and potential seller to close the deal – and you may have to pay a fee. Research the car and loan beforehand to make an informed decision.
1. The current owner needs to speak to their lender
First, have the owner call their lender and ask if you can take the loan. If you can’t make the payments, you’ll need to find another way to pay off the original loan before you buy the car. This can be done by taking out a loan of your own and working with your lender to coordinate the repayment, or by paying cash – if you have enough on hand.
2. Prepare your receipts
You will likely need to bring proof of your income, such as B. Your most recent payslip and driver’s license. You may also want to check with the seller in advance to make sure they have a letter of purchase – or bill of sale – ready. Since he is the one selling the car, he needs to prepare this document.
3. Meet the seller in person
Arrange a public meeting and bring someone you trust with you. Also, do not send money to the seller before the meeting. If they ask for payment before you see the car or finalize the details, walk away – it’s probably a scam.
4. Request a copy of the original contract
Ask the owner to bring a copy of the original contract, or request a copy directly from the lender. Make sure you fully understand all the details of the loan. Ask questions about details that are not clear. This process requires you to apply to the lender so they can check your creditworthiness. Keep in mind that you are not guaranteed to get the same terms.
5. Try to negotiate a deal that is acceptable to both of you
You must negotiate with the original lender and the prospective seller. Review the needs of each party and try to find common ground – if possible. After closing the deal, sign the loan transfer and send it back to the lender. Once this process is complete, you are the main borrower of the car loan.
Questions to ask yourself before deciding to take out a car loan
It is important that you are very careful when deciding whether to take over the car payments from another driver. If you are considering this option, here are some questions to ask yourself before making an offer to the seller.
Is the car worth the loan installment?
Before you decide to take on the loan payments for a car, you need to make sure you are getting a car that is worth the payments you will be taking on.
In many cases, it can be a bit more of a hassle but financially better to pre-qualify with other lenders and choose one that offers a better interest rate or less interest overall with a shorter term. You’ll need to coordinate payout between lenders, but it can be worth the extra legwork.
Can you keep the car long enough to pay off the loan?
If you decide to take on the loan payments, you need to make sure you can keep the car for the number of years stipulated in the original contract. In some cases, this can take more than five years, so you need to make sure you can repay the loan without any problems.
If you can’t keep the car for that long, you could be stuck trying to sell the car while there’s still a pledge on it.
Will you get a car with a high loan balance?
When you take out a car loan, you need to make sure the balance is affordable for you. If the seller owes $20,000 and sells the car for $25,000, you pay the entire loan balance plus $5,000. This is not an uncommon situation.
If you don’t have the cash to pay for the vehicle in full up front, you can consider taking over existing car payments. It may not be the most attractive option and the seller’s interest rate may not be the best. But it ensures that you get a car without saving a large down payment and signing a new loan.