How to Transfer a Personal Loan to Another Person?

Anyone that has been dealing with loan debt knows it’s a huge commitment. As circumstances become difficult over time, one may start considering passing over their loan to a helping hand.

Whether it’s a family member or a friend who’s offered to help, the main question is, how to transfer a personal loan to another person?

To find out whether it’s possible and the right way to do it, keep on reading. 

Let’s dive in!

Can You Transfer a Personal Loan to Someone Else?

Personal loans, also known as instalment loans, generally cannot be transferred to another person if you’re the only borrower. The reason for this is that when getting a personal loan, the lender requires that the borrower has a good credit score, a solid financial history and a steady income

However, a transfer is possible if you have a co-signer or a guarantor on a loan. Many personal loans allow a co-signer or a guarantor to make sure that the payments will be completed should the borrower default

Furthermore, borrowers that have difficulties during the qualification process for personal loans due to their poor credit scores, are required to have a co-signer or a guarantor to help them with the loan approval. 

Having a co-signer or a guarantor on a loan means that they are liable for continuing the payments if the borrower defaults. The bank or the lender will first try to contact the original borrower. If they can’t reach the borrower, the next person in line is the co-signer or the guarantor. 

They are responsible for paying the remaining balance or the full amount, depending on when the borrower stops with the payments.

A guarantor, on the other hand, takes over the responsibility for the rest of the balances from the moment the primary borrower stops with the payments. From a legal standpoint, this is another scenario that gets as close as possible to a personal loan transfer to another person

You might want to check out: Personal Loan Alternatives: Top 5 Backups.


What Happens if You Default on a Personal Loan?

Once you put your signature on a loan, you’re legally bound for full repayment. When signing up the contract, you should be aware of the legal repercussions if you stop paying off the loan. 

First of all, defaulting on your payment will take a huge toll on your credit score, and the lender will report you to the credit bureau

Moreover, your lender has the right to contact the collection agency and report your default, which puts you at risk of losing your property and lowering your future borrowing power. 

Plus, a loan default is marked on your credit record for several years. In a lender’s eyes, it means that you’re a high-risk borrower and lenders are less likely to approve you for a new loan. 

Depending on the type of your personal loan, your lender has the right to take your property if you have a secured loan or sue you for the debt if you’re loan is unsecured. If you have set your loan to be paid off with pre-authorized debit and you don’t have enough money in your account, the lender can charge you for non-sufficient funds. 

For lenders to prevent long repayment periods, many personal loan contracts have in place a set-off clause. Signing up a contract with a set-off clause means that the lender has the right to seize your funds from your other bank

To avoid unnecessary stress, be sure to access your financial situation and calculate the possible financial risk that comes with getting a personal loan. Playing smart will spare you from finding yourself in an uncomfortable situation of defaulting and possibly ruining your relationship with your co-signer or guarantor. Especially if that someone is your friend or a family member. 

If you want to find out about the types of loans available in Canada, read our guide on Types of Loans for Canadians: Which One Should You Choose?


All in all, a personal loan transfer to another person is nearly impossible. That’s unless you have a co-signer or a guarantor that can take over the responsibility for your balances. 

Since they are practically obligated to repay your payments if you default, you can say that’s one case scenario where a personal loan transfer to another person is possible. 

That being said, be mindful of the consequences in case you default on your payments. That’s why always think twice before signing up for a personal loan to make sure that you’re ready for such a commitment.


Can a loan be transferred from one person to another?

Certain types of loans, such as an assumable mortgage or a car loan can be easily transferred to another person. But when it comes to signature personal loans, it’s nearly impossible. So, how to transfer a personal loan to another person? That’s only possible when you have a co-signer or a guarantor on a loan. 

If you default, it’s their responsibility to continue with the payments. But be aware that defaulting comes with consequences on your borrowing ability in the future.

Can you transfer a loan to a family member?

If your loan contract has a due-on-sale clause, you can transfer your loan to another family member. For this, you need to ask your lender. However, you can always transfer a car or an assumable mortgage loan to a family member, if they meet the qualification criteria. 


When Angela combined her deep-seated love for linguistics with her growing interest for finance and money management, she struck a gold mine. She’s scoured the internet far and wide for all things related to money and finances, including payments, budgeting and investing. Now she’s eager to share her knowledge and skills with the world, determined to make it a better place. In her free time, she loves to read a good book.

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