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How to Sell a Car with Outstanding Loan?

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One worry you may have if you suddenly got caught in financial crisis is how to free up some cash and cut down on your expenses. If you have huge monthly obligations such as car loan payments, this could be extra challenging.

You might think that selling your vehicle which is under an auto loan is impossible. However, technically you own the vehicle as soon as the contract kicks off, so there’s a way to sell it and make room for extra cash.

How much is the payoff?

The first thing you need to know is how much you still owe your lender. Contact your lender, and ask how much exactly you have to prepare to pay off your balance and close out your loan.

However, if you’re still waiting for a buyer, it could be hard to tell when exactly will you be able to pay your lender. Make sure you also ask if the payoff amount changes as interest and payments affect your loan balance, and how this amount changes as each day passes.

Prepare the title

You may be able to sell without the title in your hands, however, the selling process would be a lot quicker if it is already in your possession. Call the lender and find out how long should it be released and when can you get it, while at the same time informing your buyer what to expect in order to facilitate a smooth-flowing deal..

How about trading with a dealer?

It’s definitely easier to trade in your car than sell it directly to a buyer, since dealers commonly handle all the paperwork and other stuff behind the scenes. However, it does not come for free, and oftentimes you won’t get the best value for your vehicle. Refinancing your car could be a bit risky and you might end up transferring balances.

Sell with private buyers

Most often, you’ll get the best price for your car if you sell it to someone who knows and trusts you personally. You could sell the car and use the proceeds to pay off your previous loan, possibly even make some profits, and then sign the title over to the new owner after clearing it from your lender. You may also have the buyer pay your lender directly if that makes things a lot easier.

Pay off your loan before selling the car

Although it’s not impossible to sell a car which is still under a loan, paying it can attract more buyers and this can also give you more freedom with the pricing. Some buyers can become wary of purchasing a vehicle with a loan attached. If you can produce the money to pay off the loan, it’s a better option, since you can also replace this money with the sales proceeds. However, it could be difficult if the loan is upside-down.

Visit the bank

If there are some trust issues, you can ask the buyer to visit the bank with you and directly apply the buyer’s payment to the loan, so you can sign over the car and the title.

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