Selling a car when you still owe money on it can seem stressful. But you can do it. Follow these tips.
Selling a car while your car loan is active is hard, but it is very common. While selling a car when you still have a loan on it can complicate the selling process a bit, but there are ways to go about it that can help alleviate the stress. So, there are certain things to remember to sell your car with a loan. Below are some steps to learn how to sell a car with a loan.
Determine the payoff amount
Ask your lender to lender to send you a payoff amount. This is the cost that you owe on the loan. You’ll require this so that you can pay off the remaining loan on the car before transferring the title. The payoff amount tells you how much you will need to pay off your loan as of a specific date and will include the prepayment penalties and interest that the lender may charge.
Calculate your equity in the car
Now, this is the time to know whether it makes sense to sell your car or not. There are two possible cases, first one is, the payoff amount is less than the private market value of your car, also called positive equity. That means you may walk away from the sale with some money in your pocket after pay off your loan.
The second one, the payoff amount is greater than the private market value of your car. It means you owe more on your car than it is worth on the market. Also referred to as "upside-down". You may decide that you still want to sell or not.
Find a seller and negotiate a price
Assuming that you’re making a private sale, you’ll need a seller. As you have an outstanding loan, it may not always be possible to get higher than the payoff amount but your motive should be to get it. If someone who wants to pay in installments or who makes excuses about why they need the title before they give you the money, avoid them.
Hold the sale at the bank that holds your loan, if you can
Hold the sale at the physical address of the lender is the simplest way to handle the sale. Holding the sale at the lending institution has many other advantages. The seller can wire money directly to your lender to satisfy the loan, and the lender can release the lien, give you documents that the loan is paid, and transfer the title to the new owner.
Clear the title
Once your lender has received the amount in full of the loan, then the next step is to clear the title to the car and provide a cleared Certificate of Title to you. The certificate proves that you have no further financial obligation to your lender and that they have released their lien on your vehicle. The customer needs the title as it shows they own the car clear and free. It must be signed by both you and the buyer to complete the sale and transfer the title of the car to the new owner. Have your signatures notarized is a really good idea.
Complete all necessary paperwork
The final step is to find out what paperwork is required by your state DMV and file it, to legally sell the vehicle. Ask your lender to find out all the information and documentation that you’ll need to gather to clear your loan and sell the car.