How to Sell My Unpaid Car

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Selling your car presents an opportunity to earn a profit that can be used toward a new vehicle or to add a cushion to your savings. No matter the reason you plan to sell, understanding the process of a private car sale can help you expedite the transaction once you find a buyer. If the car is not paid off, the transaction is similar, but you must go the extra step of closing the original loan with the lender so the buyer owns the car free and clear.

  • Contact your lender to determine the correct procedure to close out your loan. Be sure to request a lien release so the title is cleared.

  • Select an escrow service if you are unable to pay the loan in full in advance of the sale using your own money. There are a variety of third-party services that allow you to close out your loan and transfer ownership in one transaction. Once the seller brings certified funds for the car, the payment is deposited into the escrow account. The bank takes the money from the escrow account to close the balance of your loan.

  • Transfer the title to the buyer once the loan is paid in full. It is essential to transfer the loan immediately to avoid personal liability for the vehicle, especially if the buyer does not yet have insurance.

Tips & Warnings

  • If the sale price of your car does not cover the entire balance of the loan, you must pay the difference at the time you close the loan.
  • It is possible to use a lump sum payment from a buyer to pay off your loan in the branch of the credit union or bank that manages your loan. However, transfer the title immediately after choosing this option to reduce your liability.

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