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Lauri 23-02-09 12:00 view417 Comment0

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What to do about selling your car If You Still Have a Loan

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Selling Your Car When You Have Still a Loan
You have to pay off the loan in order to transfer ownership. The lender is liable for any difference between balance and the price of sale.
Written by Philip Reed Auto Loans Specialist | Edmunds.com Philip is an auto expert who writes a syndicated column for
NerdWallet. He has appeared on national radio and television and once wore a hidden camera for ABC News to show how to bargain for a used vehicle. His main focus is helping people save money in their car budgets.





22nd October, 2021


Edited by Samantha Allen Lead Assigning Editor Samantha Allen leads the insurance team at NerdWallet. She was previously the digital managing editor for the two publications Financial Planning and On Wall Street. She completed Northwestern University's certified financial planner course and has been covering personal finance and managing wealth for more than 10 years.







A majority of the products we feature come from our partners, who pay us. This impacts the types of products we review and the location and manner in which the product appears on a page. But, it doesn't affect our assessments. Our opinions are our own. Here's a list of and .



It's not difficult to sell a car with a loan on it, but it's a bit more complicated and may take longer.
If you're in possession of a loan the lender becomes in essence, an owner of the car. The lender's name could be on the title or the lender may actually own the title. This is to make sure you can't sell the vehicle and to the next owner, without getting its money -- or the remaining balance in the loan.
Whether you want to or trade it in to an dealer, you'll need to know how much you still owe on your loan, whether it's more than or less than the amount you can receive by selling your car, and how your lender requires you to manage the transaction.
The information you'll require
Start by gathering the basics of your loan and car
1. Ask your lender for information on "payoff amount" and how to handle the transaction. The payoff amount is how much it will cost you to own your vehicle for the full amount. The loan must be paid off completely for the lender to take ownership of the vehicle and sign on the title. If you're planning to sell your vehicle privately, ask the lender about the steps to take.
If the loan originates from a local bank, or one with branch locations in the area, it will suggest you find an investor and take the bank's office to sign the document.
If you have an loan from an online lender, they'll likely refer you to a bank partner or another financial entity to complete the transaction.

2. Find out what your car is worth. Utilizing a price guide like Kelley Blue Book or Edmunds find out the current value of your car, the amount you're likely to get if you sell the car by yourself, or the of your car that is, roughly speaking, what dealers will offer you for the car. Generally, you'll get more money for your vehicle at a private sale than when you sell it. Consider getting a or another dealer's offer. It'll provide a standard to beat and as backup should your plans fall through.
3. Subtract the payment amount from the value of the car. If the result is positive, then you have equity in your vehicle; If it's negative, you're . Selling a vehicle with negative equity means you need to pay the lender all the money from the car sale and pay for the equity that is negative.
With this knowledge in the palm of our hands, let's take a look at every scenario.
Private sale with equity positive
The buyer pays the entire amount to the lender and the lender will then transfer the difference to you. Or, the buyer will pay the remainder of your loan remaining balance back to you and make another payment to you. For instance that you owe $5,000, and the buyer is going to pay $15,000 for the vehicle, you'll get $10,000 in the sale.
Then, you and the lender sign the title and present the title to the purchaser. The buyer will take the title that has been signed (and any other required paperwork) to the state's department of motor vehicles and gets the new name and registration.
A title with a title can make a private-party sale significantly easier. If you've got excellent credit, you might be able to take an unsecure personal loan to pay the total amount due on the vehicle. With an unsecured loan the lender will not be named on the title. The title will be transferred to you and the vehicle will be yours alone. However, rates for personal loans, even if your credit score is great, will be higher than those for auto loans; pay it off when you've got the buyer's check banked.
Private sale with negative equity
If you are owed more than your vehicle has value, then you are required to pay the lender the difference between the purchase price and the amount you owe.
The buyer will pay the purchase price in cash to the lending institution. The lender will pay the difference. For instance, if you still owe $10,000, and your buyer pays $9,000 for your car and you pay the lender the $1,000 difference. Then you together with a representative of the lender will sign the title and hand that title to the person buying it so they can get an all-new the title as well as registration.
If you're creditworthy and credit, you may be able to get a personal loan to pay for the gap. The personal loans are more costly than the majority of automobile loans and you'll have to pay them off in the shortest time possible.
A title with a title could make the process of selling your car much easier. If you have good credit, you might be able to get an unsecured personal loan to cover the entire amount that you owe on the car. With an unsecured loan the lender will not be named in the car title. The title will be transferred to you and the vehicle will be yours alone. You are able to pay back the principal of the loan when the car sells.
Trading in a car you owe money on
In this scenario, the dealer can manage all paperwork. If you exchange a car that's worth more than what you owe, the dealer will give you credit for the difference, which you can use towards the purchase of the next vehicle.
>> MORE INFO:
But if you're upside down on the loan, the dealer is likely to offer to put the negative equity amount into the loan on your new car. Tread carefully with this choice because it could mean you're taking out a larger loan for the next car. You may want to consider at a lower interest rate instead of buying a brand new car.
If you'll need to borrow a loan when you trade in your vehicle, these smart choices can help you save money:
and know what rate of interest you are eligible for
before going to the dealership. This will prevent the dealer from inflating the interest rate for your new loan.
Know the trade-in value of your current car as well as the worth of the car you're purchasing. If the dealer doesn't give you prices that are comparable to these, try another dealer or sell the car to a private party.

Other variations
In certain situations the online lender might need the entire balance to be paid off of loan before it releases the title. If you have money available for the payment of your loan before selling your car, you may do that. Instead, you can ask the buyer provide the money to the lender and have the title mailed directly to them. When you've got a close relationship with the buyer (like a neighbor or friend) this will work. But it will be harder to convince other buyers to be a part of this process and spend the time and effort it takes.
Working with buyers
When you sell a car that you've a loan on certain buyers might be hesitant and uneasy to go through the extra steps. If you do it correctly, many buyers won't object. The involvement of a bank or a recognized financial institution will provide the buyer with the assurance that the process is done properly.
It is not necessary to include this loan information in your car's classified listing. But once you feel that you've found a buyer who is serious, explain the situation before making arrangements for a test drive. Inform them that you've spoken with your lender and know exactly what steps are required.
Most of the time, these steps don't prolong the selling process. In fact, closing a deal with a bank is a good idea even when a loan isn't required. It's a secure meeting location and, typically bank personnel can help with questions regarding car transactions.



About the author: Philip Reed is an expert in the field of automotive and writes a syndicated column for
NerdWallet is a brand that has been used by USA Today, Yahoo Finance and others. Author of 10 novels.







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