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 smarter financial decisions by offering you interactive financial calculators and tools, publishing original and objective content. This allows you to conduct your own research and compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The deals that are advertised on this site are from companies that pay us. This compensation could affect how and when products are featured on this site, including for instance, the order in which they may appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage or home equity products, as well as other home lending products. This compensation, however, does affect the information we publish, or the reviews that appear on this website. We do not cover the vast array of companies or financial offers that may be open to you. Alfa Photostudio/Shutterstock
3 min read Published October 27, 2022
Writer: Holly D. Johnson Written by award-winning writer, author and author Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance subjects. Alongside writing content on behalf of Bankrate and CreditCards.com, Johnson writes for clients on a regular basis which include CNN, Forbes Advisor, LendingTree, Time Magazine and many more. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to control their finances through providing concise, well-studied information that breaks down complicated topics into manageable bites. The Bankrate promises
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This compensation could affect the way, location and in what order items are listed and categories, unless it is prohibited by law for our mortgage, home equity and other home lending products. Other elements, like our own rules for our website and whether or not a product is available in the area you reside in or is within your self-selected credit score range can also impact how and where products appear on this website. Although we try to offer an array of offers, Bankrate does not include details about every credit or financial product or service. If you’re considering purchasing a used car from a private seller check whether the vehicle still has a lien on it from the lender. This can make buying more difficult however, it’s not difficult. It will mean taking additional steps to ensure that the lien is cleared prior to the transfer of the title to you. What is a car lien? A car lien identifies that the car loan lender as the principal owner of the title. It is a contract that acts as a security for the lender if a borrower defaults. The lienholder can make use of the lien as a basis to take possession of the vehicle which is why they the lien is regarded as . After an automobile loan is completely paid off, the lienholder is removed from any loan and the car is owned in full by the lender. What happens when a lien is affecting your purchase of a car When you purchase a car with a lien, ensure that the lien is eliminated prior to you complete the payment. If you’re purchasing the car using cash, and you are paying cash, you may be able to collaborate directly with the lien holder to pay off the balance on your own. Start by contacting the lienholder who is currently in charge to determine the amount required to release the car as well as other stipulations that might affect the sale. You can then negotiate in conjunction with your seller. They may be looking to sell the vehicle for a profit, but if you know the payoff amount, you might be able to secure the best price and not pay more than the car is worth. If you’re buying with a loan Getting the loan from your own pocket to pay off the loan should be fairly simple. It is possible to discuss the details of your transaction with your lender to facilitate payment to the lienholder. The remainder — in the event that there is oneis paid directly to the buyer. Once the lien has been paid in full, either you either or your lender will receive the title that will allow you to identify the vehicle under your name. The lender will be identified as the new lienholder until you . If the seller pays off the loan prior to the purchase, the sale is more straightforward when the owner of the vehicle simply pays off his auto loan and gets the title prior to the sale. However, this option isn’t available to certain people particularly those who owe tens of thousands of dollars for a newer vehicle or who owe more than what the car’s value. For instance, if the seller is owed $20,000 for an automobile that is sold privately for $17,000, they’ll still have to pay the lender $20,000 to $3,000 more than they’re getting out of the deal. In such a case, the seller may choose to the remainder of the auto loan into an unsecured loan, like one that is a personal loan or a personal loan, to have the auto loan be discharged. To make the purchase legal, however you decide to handle the situation ensure that you draft a contract that addresses the method by which the lien will be disposed of or transferred. Although it’s not mandatory in all states but it’s still an excellent idea to draft a bill of sale outlining the transactions. It should be dated and executed by both parties so that everyone is aware of the sale. You may be able to utilize a third-party escrow service to handle the financial side of this transaction. Escrow services can help make sure that the cash to be transferred securely. Be aware that escrow firms charge fees for their services- and set it up with the seller to make sure you are both using a legitimate firm. What can you do to determine whether the vehicle you’re purchasing has a lien ? Ask the seller — they should be upfront regarding the status of ownership. You may also look up the VIN, title and vehicle history report to verify that the seller is being honest. Find the vehicle identification number (VIN) with your state’s DMV. If there is a lienholder listed on the title and the DMV will be able to provide you with. A title search can provide you with information about liens. The is a good place to start looking for lienholder information. You should also get a car history report in addition. Autocheck or Carfax are both well-known businesses which provide lien history along with prior maintenance, damages and owners. The bottom line There are many instances where buyers purchase a car with an unofficial lien from an individual without having any issues or challenges. To ensure that the transaction goes smoothly and avoid any major problems, know what steps you need to take to clear the lien. It is also important to research pricing and arrange your own financing for your vehicle and get any agreements you make with a private seller writing. Learn more
Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance subjects. Alongside writing content for Bankrate and CreditCards.com, Johnson is also working with clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and 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 by providing clear, well-researched facts that break down complex subjects into bite-sized pieces.
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