How to Sell a Car if There is a Loan Involved ?

 When you go to buy a new car, you can choose to finance it with a loan, instead of paying in cash. car loan is also known as a lien . It is an agreement between you and the lender that states that you will make monthly payments of a predetermined amount until you pay off the loan in full.

The lender, also called a lien holder, technically owns the vehicle while you make the payments. Only when you pay off the loan in full do you become the legal owner of the car and the lien is removed from the title.

However, there are some situations where you may want to sell your car before the lien is paid in full. Perhaps the cost of owning a car is getting too expensive.

It is not illegal to sell a car with a lien , and there are no penalties for doing so, as long as it is handled properly. There is an important requirement; You must pay off the loan in full and remove the lien from the title before you can legally sell it to another buyer.

Selling a car you own is much easier than selling a car with a lien. However, it is entirely possible if you are prepared to cover the associated costs.

Here are the steps you must follow to sell a car with a lien.

Determine your payment amount

If you have a loan balance, you will need to pay it off before the title lien can be removed. However, the amount you have to pay is not just the outstanding balance on your statement.

Due to interest over time, the payment amount includes the full amount owed to the lender. Your loan company can give you a quote for your payoff balance.

Start selling

The next step is to begin the process of selling your vehicle. This may include taking the car in for service, checking that all systems are working smoothly, and making any necessary repairs. It's usually worth spending the time and money to repair, wash, and detail the car before you show it off to potential buyers.

value of your car

Using a price guide, such as Kelley Blue Book or NADA Guides, find the current private sale value of your vehicle. You'll usually get more for your car in a private sale than when you trade it in at a dealership. The online search will serve as a good reference point.

Sell ​​through a car dealer

If you plan to trade the vehicle in for something different, the best option is to sell the car through a dealer. Here's how it works: When you buy a new vehicle from the dealer, they'll use the proceeds from the trade-in to pay off your loan, or add the payoff amount to the new car loan. The dealer will work with your lender to transfer the title from the lien holder's name to the car dealer.

The dealer will do all the math for you and arrange the title transfer with your loan company.

Sell ​​your car with a lien privately

The other option is to sell your car to a private buyer. In this case, the sales process is the same as for any other car. Find the buyer, show him the vehicle and agree on a price. But before you can give them title, you have to pay off the loan and work out the details of the sale.

Order sale details

If you're selling your car to a third-party buyer, you can't legally transfer the title without first paying off the loan. The quickest and easiest way to do this is to visit your lender's office with the buyer to pay off the loan, remove the lien, and transfer title to the buyer. You can usually complete the transaction and transfer the title in one appointment.

The other option is for the buyer to pay off the loan. Most creditors will accept a buyer's check in the amount of the settlement in exchange for the vehicle title. However, you must visit the lender's office with the buyer and complete the settlement process.

Consider a security deposit

If you or the buyer don't live near the loan office and can't complete the transfer process in person, consider an escrow account. With an escrow account, both parties are assured that payment will be completed properly once the lien is discharged.

An escrow is often used when there are contractual agreements that must be honored until the sale can be closed.

There is a fee for using an escrow account, which is either a flat fee or based on the full sales price. However, since the account provides financial security for both the buyer and the seller, the fee is usually split equally between both parties.

In conclusion, if you want to sell your car to a private individual or give it to a dealer to get a new one, you will need to know how much you still owe on your loan, that is, if it is more or less than what you can get by selling the car and how your lender requires you to handle the transaction.

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