Buying a car with a lien Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering you interactive tools and financial calculators as well as publishing original and objective content. We also allow users to conduct research and compare information at no cost and help you make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site are from companies who pay us. This compensation may impact how and where products appear on the site, such as for instance, the order in which they appear in the listing categories, except where prohibited by law. This applies to our mortgage or home equity products, as well as other home loan products. This compensation, however, does have no impact on the content we publish or the reviews that you see on this site. We do not contain the vast array of companies or financial offers that may be available to you. Alfa Photostudio/Shutterstock
3 min read published 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, loyalty and insurance subjects. Alongside writing content for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and other publications. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances through providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces. The Bankrate promise
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This compensation could affect the way, location and in what order items appear within listing categories in the event that they are not permitted by law for our mortgage or home equity products, as well as other products for home loans. Other elements, like our own proprietary website rules and whether the product is offered in your region or within your self-selected credit score range may also influence the way and place products are listed on this website. While we strive to provide the most diverse selection of products, Bankrate does not include specific information on each financial or credit item or service. If you're thinking of buying an used vehicle from a private seller be sure to determine whether the car is still under a lien on it from an lender. This can make the purchase more difficult, but not difficult. This will require a few extra steps to ensure that the lien is removed prior to the transfer of the title to you. What a car lien is A car lien names an auto loan lender as the primary beneficiary in the title. It is a contract which acts as a protection for a lender in the event that a borrower fails to pay. The lienholder may make use of the lien to take over the car and that is the reason why they the lien is regarded as . Once the auto loan is paid in full, the lienholder is removed from being liable for the loan and the car is now owned outright by the lender. What happens when a lien is affecting the purchase of your car If you purchase a car with the lien, be sure the lien is gone before you finalize the payment. If you're purchasing the car using cash, and you are paying cash, you may be able to negotiate directly with the lien holder to pay off the balance yourself. Begin by contacting the lienholder who is currently in charge to determine the amount required to be released from the vehicle along with other terms that might affect the sale. You can then negotiate with the seller. They will likely prefer to sell the car to make a profit, however when you know the purchase amount, you may be able to secure the best price and avoid paying more than the car is worth. If you're purchasing with an loan getting a loan of your own to pay should also be relatively easy. It is possible to share the details of the acquisition with the lender so it can facilitate payment to the lienholder. The remainder , in the event that there is one- goes directly to the buyer. After the lien is paid in full, you or your lender will receive the title that will allow you to identify the vehicle under your name. The lender will be identified as the new lienholder until you . If the seller repays the loan prior to purchase sale can proceed more easily when the owner of the vehicle pays off his auto loan and acquires the title prior to the sale. This isn't feasible for certain individuals particularly those who owe thousands of dollars on a newer car or those who owe more money than the car's value. If, for instance, the seller owes $20,000 for a car that sells privately for $17,000, they will still have make payments to the lender $20,000 -- $3000 more than what they'll receive through the transaction. In these situations the seller can choose to convert the remaining auto loan to an unsecure loan similar to one that is a personal loan or a personal loan, to be able to have the auto loan cancelled. To make the purchase legal, however you handle this situation make sure you create the contract which outlines the method by which you plan to have the loan eliminated or transferred. Although it's not mandatory in all states, it is still a good idea to create a bill of sale outlining the transaction. Make sure that it is date-stamped and signed by both parties so everyone is aware about the purchase. It is possible to utilize a third-party an escrow company to manage the financial side of this transaction. A escrow service can ensure that the funds to be transferred securely. Just be aware that escrow firms charge fees for their services -and you should set it up with the seller to make sure you are both using a legitimate company. How to check whether the car you're buying has a lien Ask the seller - they must be honest about the car's ownership. You can also check the VIN as well as the title and history report to ensure that the seller's honesty. Find the vehicle identification number (VIN) at your state's DMV. If there's a lienholder on the title, the DMV will be able tell you. A title search can provide you with information about liens. The is a good start point for finding lienholder details. You should also get a car history report in addition. Autocheck and Carfax are both well-known businesses that list lien history alongside the previous repairs, maintenance and owners. The bottom line is that there are many instances where people buy a used car with the lien of an individual without having any challenges or issues. To ensure that the process runs smoothly and avoid any serious issues, you should know the steps you need to take to clear the lien. It is also important to research pricing and arrange your own auto financing , and have any agreements you sign with a private vendor in writing. Find out more
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Written by an award-winning author, writer Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. Alongside writing content articles for Bankrate and CreditCards.com, Johnson is also working with clients which include CNN, Forbes Advisor, LendingTree, Time Magazine and many more. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances with concise, well-researched, and well-written facts that break down otherwise complex subjects into bite-sized pieces.
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