how to sell a vehicle with a loan
How to Sell Vehicle with Title Loan
Several car owners sell their cars privately, either to dealers or individuals. Similarly, many car owners have their cars financed through banking institutions or credit unions.Title loans have become more prevalent as it's become more difficult for consumers to borrow money in other ways. Credit cards are harder for some people to get, home equity lines of credit have dried up, and many states have tightened regulations around payday loan lenders. Auto title loans have become a last-ditch financial lifeline for many.Now the question is: If you don't have the title, how will you sell a car?
An auto title loan is lent to an individual on the basis of his/her car title and the amount of this title loan is determined by the worth of the car. If you are unable to repay the full loan or it goes in default, then the loan company has the right to sell off the car and get back the amount of the loan. Approximately half of US states ban auto title loans outright. Be sure to check your local state laws.If you take such loan, you receive the money within a short period of time. For securing it, it is possible to request for quotes from different lenders. But you have to be sure that the rate of interest is not too high and it is convenient for you to repay the loan monthly.In some cases, legal loopholes allow title loan lenders to thrive. California, for example, has caps on the interest rates charged for small loans, but there is no ceiling for loans above $2,500. As a result, many lenders require that borrowers take out loans of at least $2,500, even if they need less, according to the Los Angeles Times.
These are few options for car owners looking to sell their vehicle with a title loan.
- Contact the Lender - The lender owns the right and also in the best position to guide you about the process. Don't worry. He must have heard this question often before and he will outline the procedure that you and the buyer should follow. Consult your bank and they will guide you through the process.
- Payoff the Loan - Another way to sell a car with title loan is to get the payoff amount on the current loan before you can sell it. You need to contact your lender/bank and request for the payoff amount on the car. Since you are not able to pay off the loan, relate with the lender/bank if it is possible to aid payment to lien holder with normal transaction, after you have reached an agreement with the lender, pay off the lender and get back the car title.
- Bank Transfer - Arrange with the buyer to conduct the sale of your car at the financial institution. You will settle the current loan with the sale proceeds and transfer the car title to the buyer. But, you need to have contact the bank beforehand to facilitate this transaction. This type of deal requires a considerable trust on the part of the buyer.
- Signature Loan - This is another option to sell your car in case you have no money to complete the loan before sale.Contact your bank and request for a cash advance on your credit card or obtain a signature loan to payback the lender. This will help your sale go more smoothly because you will have more buyers considering a car that is paid off and has a clear title.
Those considering selling a car while the bank/lender still holds the title will need to do a little more groundwork, but it's not unattainable.
When a car is purchased with financing from a private party or a financial institution, the name of the lender is entered on the certificate of title as a lien holder. When the loan on the vehicle has been paid in full, the lien holder’s name can be removed from the title and the legal owner can sell the vehicle by completing a handful of documents. If, however, the decision is made to sell a car before paying the lien holder in full, the owner has several options to remove the lien holder from the title and transfer ownership to the new buyer.
In most cases, the easiest way to sell a vehicle with a lien is to do the transaction at an auto dealership, particularly if the car is going to be a trade-in. In these transactions, dealers work directly with the lien holder listed on the title, which is usually a credit union or a bank, to facilitate the transfer of ownership. In this process, the dealer arranges for the full payment of the loan balance by using either the proceeds from the vehicle to be traded in or by adding the payoff amount to the loan being used to buy the new car.
The biggest disadvantage of going through a dealership to sell a car with a lien on the title is that the amount paid for trade-in vehicles is usually less than what can be realized by selling to a private party. The process of selling to a private buyer, however, also requires some extra work by the seller. To start, the seller should contact the lender to determine the total amount required to pay off the loan, including any additional fees, to satisfy the debt and remove the lien holder from the title.
Execute the Sale at the Lender’s Office
Executing the transaction at an office of the lender, if there is one in close proximity to both parties, is the fastest way to pay off the loan, remove the lien from the title and transfer ownership. This option is also the fastest way for the seller to collect proceeds from a sale involving a lien on the certificate of title after an agreement has been reached. In this process, either the buyer or the seller can transfer funds to the lender to pay off the balance of the loan, and documents can be executed to transfer ownership to the buyer, usually in one sitting. Regardless of the size of the lender, call ahead to ensure that there is someone in the local office to facilitate the transaction.
If settling the transaction at the lender’s office is not feasible, the buyer can pay the lender directly by using a wire transfer or a cashier’s check to satisfy the lien and then pay the remaining balance to the seller. This option provides an added level of assurance to the buyer through the avoidance of sending all proceeds to the seller, who must then transfer the funds to cover the loan to the lender.
Depending on the laws specific to each state, the buyer may be able to send paperwork related to the sale and transfer instructions along with the payment to receive the cleared certificate of title directly from the lender. If this option is not available, the lender sends the cleared title to the seller. In either situation, both parties must sign the certificate of title to complete the sale and transfer ownership to the buyer.
Using an escrow account adds an extra layer of security for both parties by having a third party verify the buyer’s funds, confirm the removal of the lien holder and facilitate the transfer of ownership to complete the transaction. The fee for using an escrow account adds an extra expense to the transaction and is usually based on the total amount of the vehicle sale. Because an escrow account protects the interests of both the seller and the buyer, the service fees are commonly split between parties.
How to Sell a Vehicle with Negative Equity (Upside Down)
If you’ve financed a new or used SUV or truck over the last couple of years, there is a good chance that you are now significantly “upside down” on your loan (negative equity). If you are happy with your vehicle, and plan on driving it through the end of your loan term, there is no cause for concern. However, if your financial situation has changed and you need to part ways with your “upside down” gas guzzling vehicle, here is how to do it.
The most important step in unloading a vehicle with negative equity is to accept the situation for what it is. Saying “if I sell my vehicle now I’ll lose money” won’t get you anywhere. The money is already gone, deciding to sell the vehicle only forces you to deal with it.
The second step in selling an “upside down vehicle” is deciding its fair market value. With the continually rising price of gas and slumping demand for gas happy SUV’s, the fair market value of your vehicle may be significantly less than used vehicle pricing guides such as NADA and Kelly Blue Book suggest.
Once you’ve established a competitive price, you need to secure funding for the difference between what you owe and what the vehicle will bring. Unless you have the difference sitting in a savings account securing this funding will be the most difficult step.
One of the most effective methods is to contact the bank that holds the title to your vehicle. Explain the situation and ask them if they will give you a personal loan (signature loan) for the difference. This technique is especially effective when dealing with “local” banks and credit unions. If they refuse, pressure them by saying “You need to help me. Either we do it this way and I have a chance of staying current on the loan, or I continue to struggle with my payments and eventually defaulting on the loan”.
Another technique is imploring the help of other local banks and credit unions in your area. Don’t get discouraged if one turns you down, keep trying. With any luck you’ll find a compassionate loan officer willing to help.
If you have no luck securing a loan for the difference of your upside down vehicle and you have no other options, you may want to consider taking a loan from your 401k or other retirement account if it means you are otherwise going to default on the loan.
If this is not an option, you may need to obtain a second job and accelerate payments on your vehicle until you owe equal to or less than what it is worth.
Once you have met the obligations of your loan it’s time to do a little marketing and salesmanship. Be sure to read my article on getting the most money when selling your used vehicle.
When you have identified a prospective buyer for your vehicle, be sure to ask your bank how to proceed with the transaction. Most likely the buyer will need to provide your bank with proof of his ability to purchase the vehicle. Typically in these situations, you sign a bill-of-sale with the buyer and once you settle up with your bank, the vehicle’s title is sent to the buyer’s bank. Each state has different laws so be sure to contact your state’s motor vehicle division as well.
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How to Sell a Motorcycle With a Loan
When you finance the purchase of a motorcycle, the lender places a lien on the title. In order to sell the motorcycle, you have to payoff the lien so that the new owner can take control of the vehicle without any third parties having claims on it. You can sell a motorcycle as a private owner by placing advertisements online or in local news papers. As with any property sale, you must negotiate with potential buyers until you reach a mutually agreeable price.
Contact the finance company that has a lien on your vehicle and ask for a 30 day payoff with a per diem. The 30-day payoff quote tells you exactly how much you have to pay the lender in order to pay off the lien today. The per diem, tells you how much you need to add on a daily basis to the payoff quote in order to account for interest accrual.
Navigate to the Kelley Blue Book website and click on the tab that says "motorcyles.9quot; Enter your zip code on the following screen and on the next page select "Motorcycle Retail Values." Enter the year, make and model of your motorcycle on the following screens to find out the market value of the vehicle.
Set a price for your vehicle that exceeds the amount you need to payoff the loan but that does not far exceed the market value. If your loan amount exceeds the motorcyle's value, set the price close to market value and use your own funds to pay down the excess balance of the loan. Advertise the motorcycle locally and in online classified advertisements.
Agree on a sale price with a buyer and arrange a closing date for the sale transaction. If you have enough money to payoff the lien prior to selling the motorcycle, then pay it off. Ask the lender to sign the release of lien on the title or provide you with a release of lien document, if allowed in your state. If you cannot pay it off ahead of time, close the loan at the office of your lender and hand the sale proceeds to your lender during closing so your lender can release the lien.
Sign and date the owner section of the title and fill in the necessary information in the odometer and title transfer fields. Obtain a receipt for the payoff from your lender and hand the title and the keys for the motorcycle to the buyer.
How to sell a vehicle with a loan
How to Sell a Car With a Loan
You can sell a car with a loan on it, but should first ask yourself whether it would be financially prudent. Most car owners find they owe more on the car than it is worth. In addition, in most cases it is cheaper to repair and maintain an older vehicle than to purchase a new one. Going to a dealership is usually a bad financial move because you trade in the vehicle and roll over the loan to the next car, which usually is worth less than you owe. In rare cases, selling the car is the best option, such as when the car truly is a lemon, you have new family members or you simply can't afford the payments.
Request information from your lender on the best ways to quickly close out your loan. You will also want to ask your loan provider to explain the process for a "lien release," which states you have no financial obligation on the vehicle. Pay off your vehicle and secure your lien release from the bank. Then advertise your car for sale in local papers and on the Internet until you find a buyer.
Open an escrow account if you cannot pay off your vehicle without selling it first. This will allow you to sell the vehicle and close out your loan simultaneously. The escrow provider will make sure payment goes to your lender, secure your lien release, and transfer the car's title to the buyer. Quite a few websites offer this type of escrow service.
Speak with your lender about transacting the sale on your behalf if you do not want to use an escrow service. Your bank will conduct the sale for you, use the proceeds to pay off your loan and transfer the title to the new owner. All financial institutions will have processes and procedures for this type of transaction. You must speak with a representative for your lender to determine how to best proceed.
Sell the vehicle on the private market if you do not want to involve your bank. Contact your bank and determine the exact amount you need to close out your loan. Set your sale price about 10 percent above that amount. Advertise the vehicle in your local paper, on bulletin boards and on the Internet. When you find a buyer, go to your financial institution to conduct the transaction. Have the buyer give the lender a certified cashier's check for the total amount to close out your loan. The bank will then issue the lien release. Take the lien release and your buyer to the DMV and request all paperwork to sign over the title to the new owner. Complete the paperwork and submit it to the DMV representative to sign over the title and complete the transaction.