Taking Over Payments on a Car Loan
Do you have a friend or relative who has asked the possibility of you taking over payments on a car loan? This type of transaction can be a tricky thing so being cautious is essentially key. Jean Scheid, owner of a Ford Dealership, tells us all we need to know if asked to take over a car loan.
The Wrong Way
There is a wrong way to take over payments on another person’s car loan. If a person asks you to make the payments on their behalf while the car loan remains in their name, a few situations may occur. Here is the downside if considering taking over payments on a car loan:
- You make the payments until the vehicle is paid in full while the title remains in your friend’s name and shows the lender as the lien holder. These payments will include the loan balance, fees, and add-on such as GAP Insurance. Once the vehicle is paid off, the lender will release the title to your friend or relative and you have no legal rights to the vehicle, no matter what was promised.
- You give the monthly payment to your friend each month with the understanding they will use it to make car payments and in turn, they are only using your money for other expenses and no payments are made toward the balance on the vehicle. In this case, most likely the lender will repossess the vehicle and you still have no legal rights to the vehicle.
- The car owner does use your money to make the monthly payments, however, once paid off, because neither the loan or the title are in your name, even if they give you the car, you can’t register or insure it if they don’t turn the title over to you.
All of these examples are the wrong way and don’t consider your legal rights to the car and should be avoided.
Image Credit: Bad Credit Car Loan by Kerembeu21/Flickr Creative Commons