How To Sell A Car With A Loan Balance Outstanding


When you sell a vehicle for which the loan is paid off and you have the title, you can generally just sign the title over to the buyer in exchange for the agreed selling price. But when there is a loan balance outstanding on the vehicle, the lender has a lien on the vehicle and you will not be able to sell it until the loan balance has been paid off and the lien is released.

Depending on the amount of the outstanding loan balance, you may be able to pay if off, obtain the title, and then sell the vehicle. You can call the bank or credit union where you financed the car to find out the exact balance owed. As pointed out on if you decide to pay off the loan before you sell the car, you should get a lien release from the lending institution, indicating that there is no outstanding loan obligation. Once the loan is paid off, the bank or credit union will generally send you the original title.

If you prefer not to use money from your savings or other sources to pay off the loan first, or if you need the proceeds from the sale in order to pay off the loan on the vehicle, you will need to make arrangements with the lender and the buyer.

As indicated on, once you have a buyer, you could call the bank or credit union and make arrangements for you and the buyer to meet with a loan officer to complete the transaction. If the lender agrees to facilitate the transaction, you can ask the buyer to meet you at the time and place agreed, with a certified check made out to you and the bank or credit union. The lender would take the check to pay off the outstanding balance on the loan and reimburse you for the difference, assuming the sale price is enough to more than cover the loan.

If it is not possible for you and the buyer to complete the transaction at the lending institution, you can take the bill of sale to the state Department of Motor Vehicles. The Department of Motor Vehicles may have a standard form for this purpose. The buyer will be issued a temporary operating permit and you can send the title as soon as the loan balance is paid off. This method involves trust on the buyer’s part.

When you sell your vehicle you will also need to take of the license plates and car leather seat covers according to the rules in your state. The plates may have to be returned to the Department of Motor Vehicles for credit. In some states such as Florida, you take your license plates with you.

And you should contact your insurance company to remove your coverage from the vehicle you sold. But you should be sure that the vehicle is covered until the title is officially transferred to the buyer, to protect you from any potential liability.