Buying a car with a lien Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct research and compare data for free - so that you can make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site come from companies that pay us. This compensation can affect the way and where products appear on the site, such as such things as the sequence in which they appear within the listing categories and other categories, unless prohibited by law. This applies to our mortgage home equity, mortgage and other products for home loans. This compensation, however, does affect the information we publish, or the reviews that you see on this site. We do not cover the entire universe of businesses or financial offerings that could be accessible to you. Alfa Photostudio/Shutterstock
3 min read published on October 27, 2022
The content is written by 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. As well as writing articles for Bankrate and CreditCards.com, Johnson writes for clients on a regular basis 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 writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces. The Bankrate promises
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So, this compensation can impact how, where and in what order items are listed in the event that they are not permitted by law. We also offer mortgage, home equity and other home loan products. Other elements, like our own rules for our website and whether the product is available in your area or at your own personal credit score can also impact the manner in which products are featured on this website. We strive to offer an array of offers, Bankrate does not include details about every credit or financial product or service. If you're thinking of buying an used vehicle from a private dealer be sure to determine if the car still has a lien on it from the lender. This could make the purchase more difficult, but it's not difficult. It is necessary to take some extra steps to make sure the lien is cleared before the title is transferred to you. What exactly is a car loan? A car lien names that the car loan lender as the primary person on the title. It is a contract which acts as a protection for a lender when a borrower is in default. The lienholder can utilize the lien as a basis to take over the vehicle, which is why the lien is regarded as . After an auto loan is completely paid off and the lienholder has been released from any loan and the vehicle is now owned by the person who borrowed it. The impact of a lien on the purchase of your car If you purchase a car with an attached lien, make sure that the lien is removed before you make the final payment. If you're buying by cash and pay in cash, you might be able to collaborate directly with the lienholder in order to pay the amount yourself. Begin by calling the lienholder in question to find out the amount required to release the car as well as other stipulations that might affect the sale. You can then negotiate with the seller. They may prefer to sell the car in order to earn a profit. However, if you know the payoff amount, you might be able to secure an excellent deal and avoid paying more than what the car is worth. If you're buying the car with a loan The process of getting a loan from your own pocket to pay for the purchase should be relatively simple. It is possible to discuss the details of your acquisition with the lender to make it easier for paying the lienholder. The remainder , if there is any -- goes towards the vendor. When the lien is paid in full, you as well as your lender will receive the title to identify the vehicle under your name. You or your lender will be identified as the new lienholder until you . If the seller is able to pay off the loan prior to the purchase, the sale can proceed more easily in the event that the person selling the vehicle simply pays off their auto loan and obtains the title prior to selling. But this isn't possible for some people particularly those who owe tens of thousands of dollars on a newer car , or those who owe more money than the car is worth. If, for example, the seller owes $20,000 for the car which is privately sold for $17,000, they will still need be liable to the lender $20,000 -- three times more than the proceeds through the transaction. In such a case, the seller may choose to the remainder of the auto loan into an unsecured loan such as one that is a personal loan, in order to be able to have the auto loan be discharged. The purchase should be made official. However you decide to handle the situation make sure you write up the contract which outlines the method by which you plan to have the loan disposed of or transferred. Although it's not mandatory in every state but it's still a good idea to create a bill of sale outlining the transactions. Make sure that it is date-stamped and signed by both parties to ensure that everyone has a record about the purchase. You might be able to make use of a third party escrow service to manage the financial side of this transaction. Escrow services can help ensure that the money to be transfered securely. Be aware that escrow companies charge charges for their servicesand then set up the service with the seller to make sure you are both using a legitimate firm. What can you do to determine whether the car you're buying has a lien Ask the seller -- they should be transparent about the car's ownership status. You can also check the VIN or title, as well as the vehicle's history report to confirm the seller is being honest. Check the number of your vehicle's identification (VIN) at the state's DMV. If there is a lienholder on the title and the DMV can inform you. A title search can provide information about lienholders. The is a good starting point to find lienholder information. Check the history of your vehicle in addition. Autocheck and Carfax are two well-known companies that provide lien history in addition to the previous repairs, maintenance and owners. The bottom line is that there are plenty of instances when people buy a used car with a lien from a private party without encountering any challenges or issues. To ensure that the process runs smoothly and avoid any major issues, be aware of the steps you need to take to clear the lien. Also, you should research the cost for your own auto financing and ensure that any agreements you enter into with a private seller in writing. Learn more
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Written by an award-winning author, writer Holly Johnson writes expert content on personal finances, credit cards as well as loyalty and insurance issues. Alongside writing content articles for Bankrate and CreditCards.com, Johnson writes for clients on a regular basis that include CNN, Forbes Advisor, LendingTree, Time Magazine and many more. Written 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-researched, and well-written details that cut otherwise complex topics into manageable bites.
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