Buyers sometimes find themselves in a financial jam after making purchases for items such as cars, trucks, motorcycles, or even furniture or other items they have bought on time. When they find they can no longer make the monthly payments they must find an alternative. If they wait until the item is repossessed they will have hurt their credit rating and have difficulty purchasing on time in the future. Finding someone who will assume the loan and take over payments will be beneficial to both parties. The seller will get out from under the obligation and the new buyer will save money.
Whenever you take over payments for someone else's financial problem buyers must protect themselves by following several steps:
1) If they are assuming the loan on a vehicle, they will need to have that car inspected by a mechanic to insure that it is in good condition and worth the price asked by the owner. If it is in need of repairs, insist that the seller has everything fixed before continuing with the transaction.
2) You need to determine if the seller owes more than the car is worth so check some places such as Kelly blue book (kbb.com) or Edmunds.com and find a fare market value on the vehicle before you commit to taking it off their hands.
3) If this was a car loan at a bank or credit company meet with a representative and try to have them rewrite the loan, putting it officially in your name, and leaving off the previous owner once they has been paid off.
If the prospective car owner (the one who plans to take over payments on the loan) has good enough credit, the bank may provide them with a new loan but it gets complicated and often the bank does not want to be involved in such transactions. The have ownership of the title to the vehicle and a contract with the person who purchased it that will be in effect until that vehicle is paid off. If the bank is not interested in allowing the loan to be rewritten, the only alternative will be for the seller and buyer to write up what would amount to a lease agreement between the two parties and this is were it can become complicated.
The new purchaser or party who is attempting to take over payments will be required to make payments which can cover the payment the previous owner has been making, so he can then meet his obligation with the bank or lender with whom he made the original agreement. Then there is insurance to be considered. With the vehicle remaining in the first owner's name, an insurance policy will also be required to be in that person's name. What generally works best, when negotiating take over payments, is for insurance to be purchased in both parties' names.
A large down payment will help insure the buyer holds up their end of the bargain when they take over payments and give the seller extra to pay on their loan, keeping ahead of payments owed to the bank or lending party. Finally, once the title is clear it should be sent directly to the party who assumed the loan.
