Can a Loan Be Transferred to Another Person in India?

Introduction

Many borrowers ask a simple but important question: can a loan be transferred to another person in India? This usually comes up during life changes like selling a house, business restructuring, divorce, inheritance planning, or when a family member wants to take over repayments. The short answer is that loans cannot be freely transferred like assets, but there are specific scenarios where lenders allow structured alternatives such as loan takeover, balance transfer, or co-borrower substitution. At Saarathi.ai, we have observed that confusion around this topic often leads to delayed decisions, higher interest costs, or even loan defaults. This guide explains what Indian lending rules allow, what they do not, and how you can choose the most practical, RBI-compliant option while keeping your credit profile safe.

What Does Loan Transfer Mean in Practical Terms?

A loan transfer usually implies changing the person legally responsible for repaying the loan. In India, loans are sanctioned based on an individual’s income, credit score, age, and repayment capacity. Because of this, lenders do not permit a simple name change on an active loan account. Any change in borrower requires fresh underwriting and lender approval. This is why most banks and NBFCs treat loan transfer as a new loan or structured takeover, not a casual handover.

Is Loan Transfer Allowed Under RBI Rules?

The Reserve Bank of India does not provide a blanket rule allowing loans to be transferred between individuals. RBI guidelines focus on credit risk, borrower accountability, and asset classification. As a result, lenders must ensure that the person taking over the loan independently meets eligibility norms. This protects both the financial system and the borrower from unsustainable debt.

Scenarios Where Loan Transfer Is Possible Indirectly

Home Loan Transfer to Another Person

Home loans offer the most flexibility because they are backed by property. A home loan can be transferred in these common situations:

• Property sale with loan takeover where the buyer takes a fresh home loan and closes the seller’s loan

• Transfer between blood relatives like spouse, parents, or children with lender consent

• Inheritance cases where legal heirs apply for loan continuation

In all these cases, the lender reassesses the new borrower’s income, credit score, and property documents. The original loan is usually closed and a new home loan is issued.

Personal Loan Transfer

Personal loans cannot be transferred directly. These loans are unsecured and issued purely on the borrower’s creditworthiness. The only practical option is:

• The new person takes a fresh personal loan

• Uses it to close the existing loan

At Saarathi.ai, we often guide borrowers to compare rates across 110+ lenders so the new loan does not end up costing more.

Business Loan Transfer

Business loans may allow restructuring in specific cases such as:

• Partnership changes

• Proprietorship conversion

• Business succession within family

However, this requires full documentation, financial statements, and lender approval. Most lenders still prefer sanctioning a new loan in the new borrower’s name.

Education Loan Transfer

Education loans generally cannot be transferred, except in rare cases of borrower death where a co-applicant or legal heir steps in. Even then, lender discretion applies.

Loan Transfer vs Balance Transfer vs Co-Borrower Change

Understanding the difference helps you choose the right option:

• Loan Transfer: Change of borrower; usually treated as a new loan

• Balance Transfer: Same borrower shifts loan to another lender at lower interest

• Co-Borrower Change: Adding or removing a co-applicant with lender approval

For many borrowers, a balance transfer is the fastest way to reduce EMI burden without changing borrower responsibility.

Eligibility Criteria for Loan Takeover

When a lender considers a loan takeover, they typically check:

• Credit score of 700+

• Stable income and employment history

• Age and loan tenure compatibility

• Property value and legal clearance for secured loans

Using Saarathi.ai’s AI Recommendation Engine, borrowers can instantly check eligibility across multiple lenders without impacting their credit score.

Costs and Charges You Should Know

Loan transfer or takeover may involve:

• Foreclosure or prepayment charges

• Processing fees for the new loan

• Legal and technical valuation costs

• Stamp duty in case of property transfer

Comparing these costs upfront helps you avoid surprises later.

Smarter Alternatives to Direct Loan Transfer

Add a Co-Borrower

Adding a spouse or family member as co-borrower can improve eligibility and ease repayment while keeping the original borrower intact.

Refinance at Better Rates

A loan balance transfer to a lower-interest lender can reduce EMIs significantly. You can compare loan offers on Saarathi.ai and track them in real time via Saarathi Bazaar.

Close and Reissue Loan

In many cases, closing the loan and issuing a new one in another person’s name is cleaner, faster, and legally safer.

How Saarathi.ai Simplifies Loan Transitions

At Saarathi.ai, we help borrowers navigate complex situations like loan takeover or refinancing with clarity. Our platform offers:

• Paperless application journeys

• AI-driven lender matching based on eligibility

• Saarathi AI expert to answer loan transfer questions instantly

• Saarathi Bazaar dashboard to track offers, approvals, and documentation

We have seen borrowers save both time and money by choosing the right structure instead of pushing for an impossible direct transfer.

FAQs

Can a personal loan be transferred to a family member?
No. Personal loans cannot be transferred. A new loan must be taken to close the existing one.

Can I transfer my home loan to my spouse?
Yes, subject to lender approval, credit eligibility, and property ownership structure.

Does loan transfer affect credit score?
If done via foreclosure and new loan, there may be a short-term impact, but timely repayments stabilize the score quickly.

Is loan transfer allowed after death of borrower?
Legal heirs or co-applicants may take over, subject to lender policy and documentation.

Is balance transfer better than loan transfer?
In most cases, yes. Balance transfer keeps the borrower same while reducing interest and EMI.

Conclusion

Key takeaways to remember:

• Loans cannot be freely transferred from one person to another in India

• Home loans allow structured takeover, personal loans do not

• Most transfers involve loan closure and reissuance

• Choosing the right alternative can save interest and protect your credit score

If you are considering a loan takeover, refinancing, or restructuring, discover personalized loan options on Saarathi.ai today and let our AI guide you to the smartest decision.