Buying a car with a lien Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive financial calculators and tools as well as publishing original and objective content, by enabling you to conduct research and compare information at no cost - so that you can make financial decisions with confidence. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies who pay us. This compensation may impact how and where products are displayed on this site, including, for example, the sequence in which they appear in the listing categories in the event that they are not permitted by law. Our mortgage, home equity and other home lending products. However, this compensation will have no impact on the information we publish, or the reviews that you see on this site. We do not include the entire universe of businesses or financial deals that might be available to you. Alfa Photostudio/Shutterstock
3 minutes read. Published on October 27, 2022
Writer: Holly D. Johnson Written by an award-winning author, writer and author Holly Johnson writes expert content on personal financial, credit card as well as loyalty and insurance issues. In addition to writing articles for Bankrate and CreditCards.com, Johnson does ongoing work for clients which include CNN, Forbes Advisor, LendingTree, Time Magazine and other publications. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to take control of their finances through providing concise, well-studied information that breaks down otherwise complex subjects into bite-sized pieces. The Bankrate guarantee
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We are compensated for placement of sponsored products and services, or through you clicking specific links on our site. This compensation could impact how, where and in what order products are displayed within the categories of listing in the event that they are not permitted by law. We also offer mortgage or home equity products, as well as other home loan products. Other factors, like our own proprietary website rules and whether the product is offered in your area or at your self-selected credit score range may also influence how and where products appear on this site. Although we try to offer an array of offers, Bankrate does not include details about every financial or credit product or service. If you are considering buying a used car from a private seller be sure to determine whether the vehicle still has a lien attached to it by an lender. This can make the purchase more difficult, but not difficult. It will mean taking additional steps to make sure the lien is cleared prior to the transfer of title to you. What exactly is a car loan? A car lien lists an auto loan lender as the principal owner of the title. It's a legal document that acts as a security for a lender when a borrower is in default. The lienholder may utilize the lien to repossess the car, which is why the lien is regarded as . When an automobile loan is paid in full and the lienholder is removed from the loan and the car is owned in full by the borrower. The impact of a lien on the purchase of your car If you buy a vehicle with an attached lien, make sure that the lien is removed before you finalize the payment. If you're purchasing with cash When you pay cash, you may be able to work directly with the lien holder to pay the balance on your own. Start by contacting the lienholder who is currently in charge to determine the total amount due to get the car released along with other terms that might affect the sale. Negotiate with the seller. They may prefer to sell the car in order to earn a profit. However, If you know the payment amount, you may be able to get a good deal -- and avoid paying more than the car is worth. If you're purchasing with an loan Getting an loan that you own to pay should also be relatively simple. You can share the details of the acquisition with the lender to facilitate paying the lienholder. The remaining amount -- if there is any -- goes to the seller. When the lien is completely paid off, either you as well as your lender will receive the title and be able to identify the vehicle under your name. You or your lender will be listed as the new lienholder until you . If the seller pays off the loan before the purchase The sale can proceed more easily in the event that the person selling the car simply settles the auto loan and gets the title prior to selling. But this isn't available to certain people, especially those who owe thousands of dollars on a newer car or those who owe more than what the vehicle is worth. If, for example, the seller owes $20,000 for the car which is privately sold at $17,000, they'll still need make payments to the lender $20,000 -- $3000 more than what they'll receive through the transaction. In such a case, the seller may choose to transfer the remaining amount of the auto loan into an unsecured loan such as an individual loan or a personal loan, to be able to have the auto loan cancelled. The purchase should be made official. However you handle this situation make sure you draft an agreement that outlines the method by which you plan to have the loan eliminated or transferred. While it's not required in every state however, it's a good idea to create the bill of sale which outlines the transactions. It should be authenticated and signed by both parties to ensure that everybody has a record of the sale. You may be able to utilize a third-party an escrow company to manage the financial aspect of the transaction. A escrow service can make sure that the cash to be transferred in a secure manner. Be aware that escrow companies charge fees for their servicesand then set up the service with the seller to ensure that you're using a legitimate business. How to check whether the car you're buying has a lien ? Ask the seller -- they should be upfront regarding the status of ownership. You may also look up the VIN, title and vehicle history report to confirm the seller's honesty. Look up the number of your vehicle's identification (VIN) through the state's DMV. If there is a lienholder listed on the title, the DMV will be able to provide you with. A title search can also provide you with information about liens. This is a great place to start looking for lienholder details. Get a vehicle history report in addition. Autocheck as well as Carfax have been regarded as two reliable firms which provide lien history along with prior maintenance, damages and owners. The bottom line There are numerous instances where people buy a used car with an unofficial lien from an individual without having any difficulties or problems. To ensure the process goes smoothly and avoid any major issues, be aware of the steps must be taken to remove the lien. It is also important to research pricing and arrange your own auto financing and get any agreements you make with a private seller in writing. Find out more
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Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal financial, credit card, loyalty and insurance topics. In addition to writing articles for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and other publications. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to take control of their finances with clear, well-researched facts that break down complex topics into manageable bites.
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