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How do I assume someone's car loan?
My friend can't pay his car loan anymore. However, I've always loved his car. He said he'd give it to me if I could somehow take over his loan. Is there any way that I can assume my friend’s car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Sorry to hear that your friend can’t pay his
car loan
anymore, but I’m happy to say that you may be able to assume his car loan! To find out whether you’re able to do so, talk to his lender.While many lenders don’t allow loan takeovers, some do. If the lender allows the assumption of the car loan, you’ll have to apply just as you would to a normal car loan. However, if you stop making payments, this can hurt your credit and your friend may also be forced to repossess his car from you — a situation you might like to avoid.
Another option is to sign a promissory note between you and your friend. A promissory note is an agreement between two private parties that works much like a loan contract. It’s legally binding, has a balance and interest rate, and is signed by both parties. When he gets the money from you, he simply pays his bank for the loan and essentially becomes the middleman.
The last option is for him to
sell you the car
. He can then take this money, pay off the car loan, pocket the rest, and be done with it. However, if he’s upside-down on the car loan, this is more of a predicament. You still want to get fair value pricing for the vehicle, so you may want to buy it, offer to pay the excess, and then have him repay you. Again, this small loan to pay off the balance should be affirmed with a promissory note.At the end of the day, it’s all about how much you trust each other and whether you believe that money will become an obstacle in your relationship.
If you purchase the car or assume the loan, you should also think about your car insurance needs. With the
Jerry
app, you can easily compare personalized car insurance quotes from top providers, so that all you need to do is pick the plan that works best for you. And if you pick one, we’ll even help you switch!Best of luck with taking on your friend’s loan!
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- Gregory R.
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