If you are interested in selling your car or maybe trading it in for a new one but you have a title pawn loan on it, you might be wondering what are your options. Can you sell a car if you owe money to a title loan company?
Technically, the answer is yes. It won’t be simple but it is possible. There are extra steps you will need to make and there are some things you need to keep in mind before trying to sell your vehicle.
Research Before Selling
Before you sell your vehicle to a dealership or a private party, you need to take care of a few things with your lienholder (in most cases this will be the title pawn company).
The first thing you should do is call the lienholder and find out exactly how much you still owe them. If you take your car to a dealership, they will be able to evaluate the car and tell you what you are likely to get for it (you can also use online tools like KBB or NADA to get your vehicle’s worth).
You will also need to let your lienholder know that you are interested in selling the car or trading it in and find out what their policy is.
Some questions to ask:
- Do I have to have the loan paid off before I can sell it?
- Can I pay off the loan with what I receive for the car?
Selling a Collateral Vehicle
Selling your collateral vehicle will involve some additional steps compared to selling a vehicle you own outright.
You might be planning on using the money that you get from the sale to pay off the pawn loan or you might be planning on finishing the last few payments while you wait for the car to sell.
Key Point: According to Titlelo’s title pawn guide, as long as you have a title pawn on your car, there will be a lien placed on your title.That means that the title of the car doesn’t technically belong to you, but the lender. Until the loan is paid off, the lien will not be released.
When you have your car listed for sale, you need to make sure potential buyers are aware that there is a lien on the car that you are going to either pay off before the sale or pay off with the money from the sale.
Transferring the Title with a Pawn Loan
You won’t be able to transfer the title of the car to the person to who you sold the car until the title loan is completely paid off.
If you submit a title change to the state before the loan is paid, the state will notify the lienholder of the request.
The lienholder has the right to deny the title transfer if the loan is not paid off, or a payment is not processing of the final loan amount.
If you plan on using the money from the sale to make the payment on the lien, you will need to make sure that’s something the buyer is okay with beforehand.
If you are selling your car privately, you might want to consider using an escrow service for the transaction. This will be an easy way for the buyer to make sure they aren’t being scammed, and the seller knows they will get their money.
The escrow account will hold the buyer’s funds in a secure location until they receive the title in their name. In addition to using an escrow service, you might also want to consider working with a payoff service. There are fees associated, but it depends on the amount involved.
A payoff service will make the whole process extremely easy for you. They will gather up the information of the lien holder, double and triple check the payoff amount, and make sure there is enough money in the escrow account to pay off the amount of the lien.
A payoff service can also help you find other services you might benefit from like a title transfer service. This service will make sure that the lien holder transfers the title to the buyer after the transaction is complete. These services will automate the whole process for you.
Consider Selling to a Car Dealership
If you wouldn’t mind trading in your vehicle for a different car, selling to a dealership might be a great option to get rid of the title loan.
In this situation, dealerships will usually work directly with the lien holder listed on your title to transfer ownership.
The dealership will take care of all the paperwork with the lien holder for you, and they will usually arrange for a full loan payment by rolling over the payoff amount for the lien into the loan being used for the new car purchase.
The biggest disadvantage of selling your collateral vehicle to a dealership is that the trade-in value will usually be less than what the car would sell for to a private party. This is usually because the dealership needs to make sure they make a profit by selling your car.
Can you sell a collateral vehicle if you still have a lien on it? Technically, yes, you can. To do so, there will be a lot of extra steps to take, a lot of phone calls to your lienholder, and a lot of communication with potential buyers.
If you want to make things as easy as possible, you should pay off the lien before you try to sell the car.
This will make it easier for you and the buyer because you will get the title back in your name, allowing you to transfer the title to the buyer.
Disclaimer: This content does not necessarily represent the views of IWB.