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 offering 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 to help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The products that are featured on this site are from companies who pay us. This compensation may impact how and where products appear on this website, for example such things as the sequence in which they appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage, home equity and other products for home loans. But this compensation does affect the information we publish, or the reviews that you read on this site. We do not include the universe of companies or financial offerings that could be accessible to you. Alfa Photostudio/Shutterstock
3 minutes read. Published October 27, 2022
The content is written by Holly D. Johnson Written by award-winning writer, author and author Holly Johnson writes expert content on personal finance, credit cards as well as loyalty and insurance issues. As well as writing on behalf of Bankrate and CreditCards.com, Johnson is also a freelance writer for clients including 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 the end of 2021. They are passionate about helping readers gain the confidence to manage their finances through providing clear, well-researched information that breaks down complicated issues into digestible chunks. The Bankrate promise
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We are compensated in exchange for the placement of sponsored products and, services, or through you clicking certain hyperlinks on our website. So, this compensation can affect the way, location and when products are displayed within the categories of listing, except where prohibited by law. We also offer mortgage or home equity products, as well as other home lending products. Other factors, like our own rules for our website and whether or not a product is available within the area you reside in or is within your own personal credit score could also affect the manner in which products are featured on this site. We strive to offer a wide range offers, Bankrate does not include details about 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 vehicle still has an outstanding lien from a lender. This could make the purchase more difficult but not impossible. It is necessary to take a few extra steps to ensure the lien is cleared prior to the transfer of the title to you. What is a car lien? A car lien names that the car loan lender as the principal person of the title. It's a contract that acts as a security for a lender when a borrower is in default. The lienholder can make use of the lien to take over the vehicle and that is the reason why they are considered . After the auto loan is fully paid off and the lienholder is removed from 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 buy a vehicle with an attached lien, make sure that the lien is removed before you finalize the payment. If you're purchasing using cash, and you are paying cash, you may be able to work directly with the lien holder to pay off the balance yourself. Begin by calling the lienholder who is currently in charge to determine the exact amount needed to get the car released and other conditions that might affect the sale. Negotiate with the seller. They may be looking to sell the vehicle to make a profit, however If you know the payment amount, you may be able to get the best price and avoid paying more than the car is worth. If you're buying with the help of a loan Getting the loan that you own to pay should also be relatively simple. You can discuss the details of your transaction with your lender to facilitate payment to the lienholder. The remaining amount -- should there be anygoes to the seller. Once the lien has been paid in full, either you or your lender will be issued the title to record the vehicle in your name. The lender will be listed as the new lienholder until you . If the seller pays off the loan before the purchase The sale is more straightforward when the owner of the vehicle simply pays off his auto loan and acquires the title prior to selling. This isn't available to certain people such as those who owe tens of thousands of dollars on a newer car or those who owe more than what the vehicle is worth. If, for instance, the seller is owed $20,000 for a car that sells privately for $17,000, they will still have to pay the lender between $20,000 and $3,000 more than they're getting through the transaction. In these situations the seller can choose to the remainder of the auto loan into an unsecure loan such as a personal loan or a personal loan, to have the auto loan cancelled. To make the purchase legal, however you decide to handle the situation, be sure to draft the contract which outlines how the lien will be removed or transferred. Although it's not mandatory in every state, it is still a good idea to create a bill of sale outlining the transactions. It should be dated and signed by both parties so everybody has a record of the sale. It is possible to utilize a third-party escrow service to manage the financial side of the transaction. A escrow service can make sure that the cash for the sale is transfered securely. Be aware that escrow providers charge fees for their services -and then set up the service with the seller in order to ensure that you're using a legitimate company. How do you determine if the car you're buying has a lien Ask the seller - they should be transparent about the car's ownership. You may also look up the VIN or title, as well as the vehicle's history report to confirm the seller is being honest. Find the identification number of the vehicle (VIN) with your state's DMV. If there is a lienholder on the title or registration, the DMV will be able inform you. A title search can give you information on liens. This is a great start point for finding lienholder information. You should also get a car history report in addition. Autocheck and Carfax are both well-known companies which provide lien history along with the previous repairs, maintenance and owners. The bottom line is that there are many instances where buyers purchase a car with an unofficial lien from an individual or a private company without facing any issues or challenges. To ensure that the process runs smoothly and avoid any major problems, know what steps to take to get rid of the lien. It is also important to research pricing for your own financing for your vehicle and ensure that any agreements you enter into with a private vendor in writing. Find out more
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Written by Author, Award-Winning Author, Award-Winning Writer Holly Johnson writes expert content on personal finances, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that 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 since late 2021. They are passionate about helping readers gain confidence to take control of their finances by providing clear, well-researched details that cut otherwise complex topics into manageable bites.
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