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    How You Can Sell Your Car When The Auto Loan Is Still Running

    Do you wish to sell your car with an outstanding auto loan balance still running?

    Although the process can be more difficult, it is not impossible and still realistic.

    Keep reading to learn more about the options available for managing this very situation.

    What You Need To Know First

    Keep the following in mind when transferring the auto loan to another person.

    • Check The Current Loan’s Agreement: Before transferring the loan to another person, ensure that you review all the details and fine print in the loan documents. Check if it is possible to transfer the loan to another person. Additionally, contact the lender to see if an option is available
    • Analyze The Borrower's Credibility: The borrower who is going to take over the car loan should have a good credit history
    • Transfer The Car’s Registration: Along with the loan, the existing owner will have to transfer the registration of the car to the new buyer. This process can be done by visiting the local department of motor vehicles
    • Transfer The Insurance Policy: Make sure to also transfer the auto insurance policy to the buyer. This has to be done to make sure that you do not have to pay any premium once the insurance policy is transferred 

    The Scenarios

    As mentioned, it can be difficult to sell a car with an outstanding loan balance, but it is not impossible.

    Listed below are specific scenarios that can help you obtain a good deal on the car.

    Private Sale With Positive Equity

    The total amount of the sold car will be paid by the buyer to the lender. The difference will be paid to you by the lender.

    For example, if you owe $7,000 to the lender and the new buyer is paying $10,000 for the vehicle, the lender will pay you the $3,000 difference.

    The existing owner and the lender sign the title and give it to the buyer.

    This is collected along with all the other required paperwork and shared with the governing state’s department of motor vehicles where the buyer receives a new registration certificate and a title.

    It is much easier to close a private party sale if the title is already in hand by the seller. If you have good credit, you can easily apply for an unsecured loan. This will cover the entire amount outstanding on the car.

    With the auto loan repaid, the title will come to you alone and the lender will not be named on the title.

    Even if you have an excellent credit history, the rates for this loan will likely be higher than the auto loan. Try to pay this off as soon as you have a buyer’s check cashed.

    Private Sale With Negative Equity

    When the car’s sale price is less than what you owe to the lender, you will have to pay the difference from your pocket.

    Let us say your total outstanding loan is $12,000 and the new buyer is willing to pay $9,000 for the car. In this case, the remaining $3,000 has to be paid by you to the lender.

    Once this is paid, you and the lender’s representative will sign the title and transfer it to the new owner.

    If you have a good credit history, you can easily apply for a personal loan to cover the difference.

    Make sure to pay it off as quickly given personal loans are more expensive than most car loans. The title in hand makes private sales much easier.

    You can even pay the entire amount of the loan when the car is sold.

    Trading In Your Car

    When you trade in a car that is worth more than you owe, the dealer can handle all the paperwork and gives you the credit for the difference to use towards the purchase of your new car.

    Still, if you are upside down on the loan, the dealer will offer to add the negative equity amount into the loan on the new car. This may lead to a debt trap.

    Alternatively, you can even refinance your current car loan at a lower interest rate.

    Still, be sure to keep the following in mind if you are taking out a new car loan:

    • Check your credit score and also check for your qualified interest rate
    • Before visiting the dealer, try to get a preapproval. This can keep the dealer from inflating the interest rate on the new loan
    • You should know the trade-in value of your old car and its market value before buying a new one


    The best way to deal with the situation is to first liquidate the loan through your own funds or finance the purchase with a personal loan.

    Try to sell your car privately first as it helps you get better deals.

    If that does not work out, consider other options like selling it back to the dealer or trading it in for a new car.