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 better financial choices by providing you with interactive financial calculators and tools that provide objective and original content, by enabling you to conduct your own research and compare information for free – so that you can make sound financial decisions. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The deals that are advertised on this website are provided by companies that compensate us. This compensation can affect the way and where products are displayed on this website, for example such things as the sequence in which they appear within the listing categories and other categories, unless prohibited by law for our mortgage, home equity and other home loan products. This compensation, however, does not influence the information we provide, or the reviews that you see on this site. We do not contain the vast array of companies or financial deals that might be accessible to you. Alfa Photostudio/Shutterstock
3 min read Published on October 27, 2022
Written by Holly D. Johnson Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal finance, credit cards as well as loyalty and insurance issues. In addition to writing articles for Bankrate and CreditCards.com, Johnson is also a freelance writer for clients including 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 from late 2021. They are passionate about helping readers gain the confidence to control their finances with clear, well-researched information that breaks down complex issues into digestible chunks. The Bankrate promises
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We are compensated for the promotion of sponsored goods and services, or by you clicking on certain links posted on our site. This compensation could impact how, where and when products are displayed within the categories of listing in the event that they are not permitted by law. This is the case for our mortgage, home equity and other home loan products. Other factors, like our own proprietary website rules and whether or not a product is offered in your region or within your own personal credit score can also impact the manner in which products are featured on this site. We strive to offer an array of offers, Bankrate does not include specific information on every credit or financial product or service. If you are considering buying an older car through a private seller check whether the car is still under a lien on it from the lender. This can make buying more complicated — but not impossible. It is necessary to take some extra steps to ensure the lien is eliminated prior to the transfer of title to you. What a car lien is A car lien names an auto loan lender as the principal beneficiary on the title. It’s a legal document that serves as a safeguard for a lender if a borrower defaults. The lienholder may use the lien to take possession of the car, which is why the lien is regarded as . After an automobile loan is paid in full and the lienholder has been released from being liable for the loan and the vehicle is now owned by the person who borrowed it. The impact of a lien on your purchase of a car When you purchase a car with the lien, be sure the lien is gone before you make the final payment. If you’re buying by cash and pay cash, you may be able to work directly with the lienholder to pay off the remaining balance on your own. Begin by contacting the lienholder who is currently in charge to determine the total amount due to be released from the vehicle along with other terms that might affect the sale. You can then negotiate directly with the buyer. They may want to sell the car to make a profit, however when you know the purchase amount, you may be able to secure an excellent deal and avoid paying more than what the car is worth. If you’re buying the car with an loan Getting a loan from your own pocket to pay off the loan should be relatively simple. You may communicate the details of the purchase with your lender so it can facilitate paying off the lienholder. The remainder — if there is any — goes to the seller. After the lien is paid in full, you as well as your lender will receive the title and be able to identify the vehicle under your name. 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 is more straightforward if the seller of the vehicle settles the auto loan and gets the title before the sale. But this isn’t possible for some people, especially those who owe thousands of dollars on a brand new car or those who owe more than the car is worth. If, for instance, the seller owes $20,000 for an automobile that is sold privately for $17,000, they’ll still need make payments to the lender between $20,000 and three times more than the proceeds through the transaction. In such cases, the seller may choose to convert the remaining auto loan to an unsecure loan, like one that is a personal loan for the purpose of have the auto loan discharged. To make the purchase legal, however you handle this situation ensure that you draft the contract which outlines how your lien is eliminated or transferred. Although it’s not mandatory in all states but it’s still a good idea to create an invoice of sale that outlines the transaction. It should be dated and signed by both parties to ensure that everybody has a record of the sale. It is possible to utilize a third-party escrow service to manage the financial aspect of this transaction. A escrow service can ensure that the money to be transferred securely. Be aware that escrow companies charge fees for their services- and set it up with the seller in order to ensure that you’re using an authentic business. What can you do to determine whether the car you’re buying has a lien Ask the seller – they should be upfront regarding the status of ownership. You can also check the VIN as well as the title and history report to ensure that the seller is being honest. Check the number of your vehicle’s identification (VIN) with the state’s DMV. If there is a lienholder listed on the title, the DMV can provide you with. A title search will also provide information about lienholders. The is a good place to start looking for the information of lienholders. Check the history of your vehicle as well. Autocheck as well as Carfax are two well-known businesses which provide lien history along with the previous repairs, maintenance and owners. The bottom line There are many instances where individuals purchase a used vehicle with the lien of an individual or a private company without facing any challenges or issues. To ensure that the transaction goes smoothly and avoid any serious issues, you should know the steps you need to take to remove the lien. It is also important to research pricing for your own auto financing and get any agreements you make with a private vendor in writing. Learn more
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Written by Author, Award-Winning Author, Award-Winning Writer Holly Johnson writes expert content on personal finance, credit cards as well as loyalty and insurance issues. In addition to writing articles for Bankrate and CreditCards.com, Johnson does ongoing work for clients which include CNN, Forbes Advisor, LendingTree, Time Magazine and many more. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to manage their finances by providing concise, well-researched, and well-written facts that break down otherwise complex topics into manageable bites.
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