If you don’t have the cash to purchase a used vehicle from a private seller outright, taking over someone’s loan payments may be an option. But the process of taking over the payments on a used car is complicated and may not be possible in certain cases.

Steps for taking over a car loan when buying a used car

Before taking over a car loan, be sure it’s the right option for you. You will have to go through the original lender and the potential seller to close the deal — and it’s possible you may have to pay a fee. Research both the car and the loan ahead of time to make an informed decision.

1. The current owner must talk to their lender

First, have the owner call their lender and ask if you can take over the loan. If you can’t take over the payments, you will have to work out another way to take care of 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 payoff, or by paying cash — if you have enough available.

2. Prepare your supporting documents

You will likely need to bring proof of your income, such as your most recent pay stubs, and your driver’s license. You may also want to coordinate with the seller ahead of time to be sure they have a letter of assignment — or bill of sale — ready. Since they are the one selling the car, they must prepare this document.

3. Meet with the seller in person

Coordinate to meet in public and bring someone you trust with you. Also, don’t send the seller any money ahead of the meeting. If they are demanding payment before you see the car or finalize the details, walk away — it is likely 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 completely understand all of the details of the loan. Ask questions about any details that aren’t clear. This process will require you to apply with the lender so that it can check your creditworthiness. Keep in mind that you are not guaranteed to get the exact same terms.

5. Try to work out a deal that’s acceptable to both of you

You will have to negotiate with the original lender and the potential seller. Review each party’s needs and try to find common ground — if possible. After closing the deal, sign off on the loan’s transfer and return it to the lender. Once this process is complete, you will be the primary borrower on the car loan.

Questions to ask before deciding to take over a car loan

It is important that you use an abundance of caution when you are deciding if you want to take over the car payments from another driver. If you are considering this option, here are a few questions you should ask yourself before submitting an offer to the seller.

Is the car worth the loan payment?

Before you decide to take over the loan payments on a car, you need to make sure that you are getting a car that is worth the payments that you will be taking on.

In many cases, it may be a bit more of a hassle but better financially to prequalify with other lenders and choose one that offers a better rate or less interest overall with a shorter term. You will have to coordinate the payoff between lenders, but it may be worth the extra legwork.

Will you be able to keep the car long enough to pay off the loan?

If you decide to take over the loan payments, you need to make sure that you can keep the car for the number of years required by the original contract. In some cases, this could be more than five years, so you need to make sure that you will have the ability to pay off the loan without running into any issues.

If you can’t keep the car for that long, you could be stuck trying to sell the car while there’s still a lien on it.

Will you be getting a car with a high loan balance?

If you are taking over a car loan, you need to make sure that the balance is affordable for you. If the seller owes $20,000 and is selling the car for $25,000, you will be taking over the full balance of the loan plus $5,000. This isn’t an uncommon situation.

Next steps

If you don’t have the cash to pay for the vehicle in full upfront, you could 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 will ensure you get a car without the hassle of saving up a large down payment and signing a new loan.

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