How to Transfer a Car Loan to Another Person From a Deceased Loved One

by Amanda McMullen

    When someone dies, creditors don't automatically cancel their debts. If a loved one dies and leaves behind a car loan, the lender will still expect to receive payment. Depending on the circumstances, you can assume the loan's payments, acquire a new loan in your name or allow the estate to pay the debt in full. However, few lenders will allow you to transfer an existing loan into your name.

    Lenders don't typically allow another person to assume a deceased individual's car loan. If the car transferred to a new owner upon death, or was part of a trust, the lender will allow someone else to assume the loan's payments. If the loan goes into default, however, the lender will repossess the vehicle. If you inherited the vehicle and want the loan to be in your name, you can request a refinance.

    If the deceased individual's estate goes through probate, the lender will usually file a claim against the estate for the balance of the car loan. In this case, it won't be possible to transfer the loan. To pay the estate's debt, the estate's executor must sell the deceased's assets. The car can be sold as well. All proceeds less than or equal to the car loan's balance must go to the car loan lender. However, if the deceased had enough money or other assets to pay the car loan without selling the car, the lender will release his lien and the car will pass to an heir.

    If a vehicle is owned and financed by two people, the death of one doesn't cancel the other's responsibility for the loan. In such cases, the other borrower must continue paying the loan, and no transfer will be necessary. If the car loan had a cosigner who did not inherit the vehicle, the cosigner will be responsible for the loan payments, but the vehicle will pass to its designated heir. If the heir wants to take responsibility for the car payments, he must refinance the loan in his own name.

    Regardless of who is responsible for the loan, the lender can repossess the vehicle if the payments stop coming. In cases where the estate's assets are insufficient to pay the car loan's entire balance, the executor can elect to make payments on the car during probate but discontinue them at the end of the proceedings. The individual who inherits the car can take over the payments when probate is closed. However, if at any point the loan goes into default, the lender can repossess the car.