If you need to sell the car, but you still haven't repaid a title loan borrowed with this car title as collateral, you should find out if it's allowed to sell a car with a lien.

Yes, you can sell a car with a Title LOan on it, but make sure the loan is paid off before transfering the title to the new owner.

Car Title Loans

How to Sell a Car with a Title Loan on It

It’s not so easy, but possible to sell a car with a title loan on it. Don't forget to inform potential buyers that you are still paying off the title loan on the car they are going to purchase.

The principle of an auto title loan work is putting a lien on the title of your vehicle. The lender starts to technically own the vehicle. To get the ownership back you are to repay a hold the lending company has over your loan. Until the moment the lien is released, the vehicle won't belong to you so that you could sell it. 

Transferring the Car Title with a Car Title Loan

Unfortunately, you will not be able to officially transfer the title of the car to the name of the new owner until the car title loan is paid off. When you submit the title change, the state will know about any liens or holds on the car. The government is able to prevent any transfers.

Before using the money from the car sale to repay the title loan discuss it with the buyer. Consider friends or family members who are sure of your repayment ability. They may be more willing to wait for their title transfer. 

How to Sell Your Car When You Have a Car Title Loan

Of course, the easiest and the best way to sell a car used to secure a title loan is to pay off the loan first. This will make the car sale safer for buyers. Pay off your Auto Title Loan online or at any store near your location.

Once you are done with your Title loan repayment, you are free to sell the vehicle with no worries about who owns the title. You are the only owner of the car title again, which means you can transfer it to a new buyer. 

Contact the lien holder

First of all, you should think about contacting your lienholder before selling your car. Ask the lender to provide you with the exact amount you owe him so that you could calculate how much it's necessary to make in the car sale.

Trading in or selling a car with a title on it at a dealership

Taking advantage of dealerships or a car trade in service, you'll be able to put the responsibility of a title transfer on the dealer. It may be easier than selling the car privately. However, not so profitable. A dealership will want to earn some cash on the car sale too. 

Don't forget that you’ll still have to pay the difference between your loan balance and the payment got from the dealer. If the dealership offers to pay off the total amount you owe on your loan, confirm how it’s paying off the loan. 

A car trade-in with negative equity: Your options

Selling a car with a lien to a private party

To sell a car with a title on it to an individual will require some extra steps. Either pay off your loan before you sell the car or find someone who'll agree to pay off your car title loan for you. It may take more time, but is likely to bring you more money than using trade-in or a dealership. 

Pay off your loan before selling

As soon as you pay off your Title loan balance, your lender will send a lien release document to the state transportation agency and you'll be able to transfer the car title.

After you get the title, you can transfer it to the buyer.

Let the buyer to pay off your loan

If you fail to repay the Title loan yourself, you may discuss the payment option with a car buyer. Just visit the lender’s office with the buyer to complete the sale. Or consider setting up an escrow account to hold the buyer’s money till the lender receives the title. An escrow account will make the process safer and easier, though you’ll be charged some fee for it. You or the buyer could choose to cover the fee individually, or you might agree to split the cost evenly.

Bottom Line

Though selling a car with a title loan on it seems confusing, it's possible. Make sure it's allowed under your Title Loan contract. Choose whether you prefer selling a car to a private buyer or use a trade-in option at a dealership company. And start the process.