Selling A Car With A Loan Can Be Easy If You Do It Right
Selling a car you still owe money on can be intimidating, but it could be an easy and smooth transaction if you do it right.
Its important to know your cars value, the payoff amount and whether you have negative or positive equity. In addition, maintaining an open dialogue with the lender can ensure accuracy and allow you to figure out all your options. Each lender has its own rules and regulations when it comes to selling a car with a loan, and its important you follow them, so there arent any issues that arise later on. If the bank needs the payoff amount before you can sell, there are options, too just keep in mind some of these choices can cause more debt.
Always weigh the pros and cons before making any final decision when selling your car with a loan.
Selling With Negative Equity
If youre trying to sell your car with a loan and learn you have negative equity, that means you owe more on your car than its worth on the market. But while this sounds a little scary, it isnt uncommon. In 2020, 44% of drivers with auto loans were upside down on them. While negative equity can pose some challenges, the options below can help. Keep in mind: No matter which option you choose, youll still need to pay off the negative equity in some way.
- Roll the negative equity into your next car loan. When you trade in your vehicle to a dealership, you likely wont get as much for it as in a private sale, but you could finance the negative equity into the loan for your next car. This is often the most convenient option, as the dealer does all the paperwork and you effectively make payments on your negative equity by paying your next car loan. However, a word of warning with this choice: By adding on old debt to your new loan, youre likely to be immediately underwater on your new car. If you dont fully pay off this loan, youll run into the same problem down the road.
- Sell your car to a dealer. Rather than make a trade-in or do all the work required in a private sale, you could simply sell your vehicle to a dealership. The dealer will likely offer you the cars wholesale value, which is less than its trade-in or private-sale values, and youll likely have to pay the difference in negative equity out of pocket.
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Where Can I Get A Private Party Auto Loan
If youre looking for a private party auto loan, you have a handful of options to choose from, including securing a loan from a bank, credit union or online lender.
Generally, you need to have an idea of the car you want to buy before you apply. Once you know how much youll need to borrow, compare lenders to find the most competitive deal youre eligible for. After you apply and get approved, the lender sends the funds either directly to you or to your seller and you can begin the process of transferring the title. Keep in mind, repayment starts as soon as the loan is issued.
Heres a closer look at each of your options:
Whether you need cash for a private party car loan, home repairs or to pay off debts, online lenders are a great option to help you secure financing quickly and efficiently.
Online lenders have a quick and convenient application process, in which you can simply apply online on your phone or desktop and youll usually receive approval and funding within a business day if all of your financial ducks are in a row.
If youre choosing this route, youll need to have a solid idea of how much you need to borrow. Make sure you have a stable source of income and that your credit score and debt ratio are in good shape too. This combination will help you secure a lower interest rate. Always do some comparison shopping between online lenders to secure the best deal for your needs. Compare personal loans by online lenders.
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How To Sell A Car Privately
Selling your car yourself can be easy and profitable, especially if you start with an online ad on KBB.com. Even so, there are a few important things to keep in mind. These simple steps will help protect you and help make the process go smoothly.
The following is not intended as an exhaustive list of everything that may be involved in your sales transaction, as each sale is different. Be sure to also check the laws and regulations in your particular state.
Compare Payoff Periods And Costs
Your interest rate on a private party auto loan will depend on a number of factors, including the length of the loan , your credit history and the cars age and mileage. Pick the loan term that best fits your budget. Longer terms may have smaller monthly payments, but remember: The longer the term, the more interest youll end up paying over the life of the loan. Some lenders, including Bank of America, may let you prepay without penalties, which can save you money on interest.
You can use the Bank of America auto loan calculator to estimate what your monthly payments might be based on the loan amount, term and annual percentage rate .
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Where To Find Private Party Auto Loans
Loan products vary from one financial institution to another, so not all lenders carry private party auto loans. But you can get a private party auto loan through most large financial institutions, community banks, local credit unions and online lenders.
Some lenders may require the vehicle to meet certain criteria. For instance, they may require the car to be under 10 years old with fewer than 120,000 miles in order to consider the buyer for a loan.
Other lenders may have a minimum loan amount. If the vehicle you want is $6,000, but the lender doesnt offer loans that small, youll have to find another lender.
Be sure to carefully review the lenders criteria before applying for a private party auto loan.
How To Sell Your Car In A Private
Are you in the market for a new or used car? You might want to get rid of your old one first.
Its nice to have a backup ride in the driveway. But older cars are notorious money pits: registration renewal fees, wheelage taxes, loan payments, and routine maintenance all add up, not to mention increasingly burdensome outlays for unexpected repairs. At some point, youre throwing good money after bad.
When that point comes, its time to sell. But how you sell your car makes all the difference. Compared with dealer trade-ins, private-party sales almost always result in a higher net sales price. But its easy to leave money on the table unless you take pains to earn more.
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Ensure A Safe Transaction
If the person is serious about buying the car, he or she will likely want to negotiate the price. Ideally, youve discussed forms of payment in advance, and once youve settled on a price, you can either meet them at their bank or credit union to complete the transaction or complete the transaction using a touchless payment option such as Zelle, Venmo, or PayPal.
When selling your car yourself, refuse any unusual requests, such as driving the would-be buyer to another location. Often, such a request is framed in terms of getting the money or arranging a loan to finish the sale. Instead, tell the buyer to make the arrangements on his or her own, leave a deposit and ask that the person gets in touch when ready to conclude the sale.
Due to safety reasons, be sure not to do test drives that begin and end at your home. Be sure to have the paperwork ready beforehand and keep the cars title, unsigned and out of sight until you have full payment.
Be sure the form of payment is legitimate. Stick to well-known touchless payment options, including Zelle, Venmo or PayPal. These online payment services allow the users to send and receive funds directly and securely without exchanging bank information. If the person prefers to provide a cashiers check, these payments are generally safer and less susceptible to fraud than certified checks.
Beware of fraudulent escrow services and protect yourself with secured payment
Remember these tips before you agree to use an escrow service:
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How To Find The Vin On A Car
You may be able to get the VIN from the seller over the phone, so you can do a VIN check before you even go out to see the car.
The seller can find the VIN:
- On the driver’s side of the dashboard
- Under the hood in front of the engine
- Inside the driver’s door jamb
- Under the spare tire
- Or in a rear wheel well
Alternatively, you can ask the seller to provide a VIN check. Ideally, you’ll be able to get it directly from the VIN check vendor’s website. This eliminates the possibility of the seller altering the information on the report or deleting pages before handing it over to you.
Good For Bank Of America Loyalists: Bank Of America
Preferred Rewards members may qualify for a rate discount of up to 0.5%. Additionally, you can apply online for a Bank of America auto loan before youve chosen a car and lock in your rate for 30 days while youre shopping around. If youre still figuring out your budget, this can help you decide how much you can afford.
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Tips For Buying A Used Car From A Private Seller
Keep these pointers in mind when buying a used car from a private party:
- Check the vehicles history. Run a check on the vehicle identification number to make sure the car isnt stolen and hasnt been salvaged.
- Verify the sellers identity. Ask to see the sellers provincial ID to make sure youre buying a vehicle from the person on the cars title.
- Have your mechanic look at it. Mechanics tend to favor the person theyre working with you might get a more honest assessment if you use someone youve worked with before, rather than the sellers.
- Give it a spin. Test driving your vehicle is the only way to tell if its right for you and can help you spot potential problems.
- See the title before you buy. Its a red flag if the seller cant produce the title up front or wont show you it before you sign the bill of sale.
- Double-check all sale and registration paperwork. Nobody likes delays due to incomplete or sloppy paperwork.
Ready To Get Your Next Car Loan
Now that you know why a private party auto loan from a direct lender might not be in the cards for you as a bad credit borrower, it’s time to find out what is, and Auto Credit Express wants to help.
We work with a nationwide network of special finance dealers that have subprime lending resources. Fill out our fast and free car loan request form, and we’ll work to connect you with a local dealership right away. Don’t hesitate any longer!
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What Documents Will I Need To Provide
While each lender has its own set of eligibility requirements and application process, there are some overlapping themes. Heres a look at the key documents youll be asked to provide as you go through the loan application process:
- Proof that youre of the legal age in your province or territory.
- Proof of your employment status and monthly income .
- A valid Canadian identification card to confirm your identity, your address and phone number.
- An active Canadian bank account with direct deposit capability.
- Your credit report with your credit score.
WHAT IF THE SELLER STILL OWES A PAYMENT ON THE CAR?
Sometimes a seller is offloading their vehicle before theyre done making payments on the car. If this is the case in your situation, it is possible for you to become responsible for loans left on a vehicle, even if the loans were taken out by another party.
In a nutshell, the seller may have financed the car with the vehicle acting as collateral on their loan. This means that the lender has the first rights to the car until the remainder of the loan is paid off. It doesnt matter who owns the car at any given point in time.
Someone has to pay off the sellers loan, and it could be you unless you ensure that the seller settles the debt before transferring the vehicle to you.
Read our guide to selling a used car with an outstanding loan to learn more about how you as a buyer can work with sellers to handle sales involving existing car loans.
Maintain A Paper Trail
Its important to keep a paper trail when selling a car. At a dealership, the paperwork is handled for you. When you sell a car to an individual, its your responsibility to make sure the transfer is handled properly. By doing the legwork upfront, it can eliminate hassles down the road.
Each state has different rules regarding proper title transfer, but most require that the seller and the buyer fill out paperwork to ensure the transfer is legal.
In many states, the seller signs the back of the existing title, along with the date, sales price, and exact odometer reading* before handing it over to the buyer. You should also make a copy of the signed title for your records.
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*An accurate odometer reading is critical when you sell. Once you sign off on the title, the odometer reading provides proof of the moment in time the car is no longer legally yours. Dont round it up the buyer could have an accident within two miles of the sale, and claim that you are responsible.
Most states recommend that buyers and sellers complete a bill of sale along with a release of liability form to provide proof of the transfer and to protect the seller from any future tickets, violations or other problems with the vehicle. DMV.org, a clearinghouse of all state DMVs, provides a sample Bill of Sale as well as Release of Liability information.
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Accept Only Cash Or An Official Bank Check
You can never afford to be casual about this part of the sales process! You are almost certainly selling the vehicle to a person you dont know. This can include someone with less than honorable intentions, including someone who is fully prepared to commit outright fraud. Though you should always hope for the best, you need to prepare for the worst.
First rule, never accept a personal check from the buyer whether for full or partial payment of the sale price. A personal check can bounce, in which case the buyer will have both the cash and your car in his or her possession. Its even possible that the buyer can pass a check that is entirely fraudulent, such as one drawn on the account of an unknowing third party.
For that reason, you should accept only cash or a bank check for payment. A bank check or cashiers check is issued by the bank itself. To be extra careful, insist on going to the bank with the buyer to get the official check so you know its legit there are Craigslist scams in which buyers pass counterfeit bank checks that are impossible to detect until they bounce.
This may be inconvenient and even a bit embarrassing but better to swallow that bitter pill upfront than deal with cleaning up a certified mess later on.
Ways To Pay Off A Financed Car In A Private Sale
Thinking of selling your financed car privately? Here are 3 options for paying off your current loan:
1. Sell your car and use the money to pay off the loan
This is the easiest option for selling a financed car when moneys tight, but you need to earn the trust of your buyer for them to give you their money so that you can pay off the loan.
- Be direct and honest. Let the buyer know you owe money on the car and that youll pay off the loan in full immediately after the transaction. For peace of mind, offer to bring the buyer to the bank or lender and clear the debt in front of them. Get a copy of the vehicles history report from a company like CARFAX and show the buyer that there is no outstanding lien on the car. If youre selling a car in Ontario, the Provincial Government actually sells used vehicle information reports for a nominal fee of about $20.
- Profit or loss? Look at how much you can sell the car for and how much itll cost to repay the loan fully including any early repayment fees and other costs. This will give you an idea if youre going to gain or lose money from the sale.
How much should I sell my car for?
2. Refinance your car loan before selling
Need extra cash? Refinance instead of selling.
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