Yes, you can sell a car with a title loan on it, but it requires some extra steps than selling without a title loan. First, You need to pay off the loan before you can transfer the title to the new owner.
This can be done by using the sale proceeds or negotiating with the buyer to pay the lender directly. Once the loan is settled, the lender will release the lien, allowing you to transfer the clear title to the buyer.
It’s important to communicate transparently with potential buyers about the title loan to ensure a smooth transaction.
Let’s see more details.
What is a Title Loan?
A title loan is a type of loan where you use your car as collateral. It means that the lender holds the title of your car until you pay off the loan. If you don’t pay back the loan, the lender can take your car.
Title loans are often short-term and come with high interest rates, making them a risky option for borrowing money.
How Does a Title Loan Work?
When you take out a title loan, you give the lender the title to your car. The lender then gives you money, which you agree to pay back over time. Until you pay off the loan, the lender keeps the title, which indicates you don’t fully own your car until the loan is paid off.
The loan amount is usually based on the value of your car, and you can typically borrow between 25% to 50% of your car’s value.
Can You Sell a Car With a Title Loan?
Yes, it is possible to sell a car that has a title loan, but the process involves additional steps compared to selling a car without such a loan. Here’s how you can do it.
Step 1: Determine Your Car’s Value
First, find out how much your car is worth. You can use websites like Kelley Blue Book (KBB) or Edmunds. These sites will ask for details like the make, model, mileage, and condition of your car. They will then give you an estimate of your car’s value.
Knowing your car’s value will help you understand how much you can sell it for and whether you have positive or negative equity.
Step 2: Find Out Your Loan Payoff Amount
Next, contact your lender to find out how much you still owe on your loan, which is called the payoff amount. It might be different from the remaining balance on your loan because of interest and fees.
The payoff amount is the total amount you need to pay to clear the loan and get the title back from the lender.
Step 3: Compare Your Car’s Value to Your Loan Payoff Amount
Compare the value of your car to the payoff amount of your loan. If your car is worth more than what you owe, you have positive equity.
On the other hand, if your car is worth less, you have negative equity. The comparison will help you understand your financial situation and plan your next steps accordingly.
Step 4: Talk to Your Lender
Let your lender know that you want to sell your car. They might have specific steps you need to follow. Some lenders might even help you with the sale. Communicating with your lender is necessary because they hold the title to your car, and you will need their cooperation to complete the sale.
Selling a Car With Positive Equity
If your car is worth more than what you owe, selling it is easier. Here’s the process:
Find a Buyer
Look for someone who wants to buy your car, it could be a private buyer or a dealership. Make sure to let them know that there is a title loan on the car. Being upfront about the title loan will build trust with potential buyers and avoid any surprises later on.
Pay Off the Loan
Once you find a buyer, use the money from the sale to pay off the loan. You will need to contact your lender to get the exact payoff amount. The buyer might need to pay the lender directly to make sure the loan is paid off.
This step ensures that the lender releases the title, allowing you to transfer it to the new owner.
Transfer the Title
After the loan is paid off, the lender will release the title. You can then transfer the title to the new owner. It usually involves a trip to the Department of Motor Vehicles (DMV). Make sure to complete all necessary paperwork to ensure a smooth transfer of ownership.
Selling a Car With Negative Equity
If your car is worth less than what you owe, selling it is a bit more complicated. Here’s what you need to do:
Find a Buyer
Just like with positive equity, you need to find someone who wants to buy your car. Let them know about the title loan and the negative equity. Being honest about the situation will help you find a buyer who is willing to work with you.
Pay Off the Loan
You will need to pay off the loan before you can transfer the title. Since the sale price of the car won’t cover the full loan amount, you will need to come up with the difference, which might mean using your savings or taking out a personal loan. It is essential to pay off the loan to get the title released by the lender.
Transfer the Title
Once the loan is paid off, the lender will release the title. You can then transfer the title to the new owner at the DMV. Follow all legal requirements to ensure a smooth transfer of ownership.
Tips for Selling a Car With a Title Loan
Here are some tips to make the process smoother:
Be Honest With Buyers
Avoid any surprises later on, let potential buyers know about the title loan from the start. Transparency builds trust and makes the selling process more straightforward.
Work With Your Lender
Your lender can be a valuable resource. They might have programs or advice to help you sell your car. Some lenders might even assist with the sale process, making it easier for you to pay off the loan and transfer the title.
Consider Refinancing
If you’re having trouble selling your car, consider refinancing your loan, which might lower your monthly payments and make it easier to pay off the loan. Refinancing can also give you more time to find a buyer without the pressure of high monthly payments.
Get Everything in Writing
Having everything documented will protect you and ensure that all parties are clear on the terms of the sale. It’s recommended to get all agreements in writing, including the payoff amount from your lender and any agreements with the buyer.