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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 smarter financial decisions by offering interactive financial calculators and tools as well as publishing original and objective content. We also allow users to conduct research and compare information for free to help you make sound financial decisions. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this site come from companies that compensate us. This compensation can affect the way and where products appear on this site, including such things as the sequence in which they be listed within the categories of listing, except where prohibited by law. This applies to our mortgage, home equity and other home loan products. However, this compensation will not influence the content we publish or the reviews that you see on this site. We do not contain the entire universe of businesses or financial offerings that could 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 financial, credit card, loyalty and insurance subjects. In addition to writing for Bankrate and CreditCards.com, Johnson is also a freelance writer for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and many more. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to take control of their finances through providing concise, well-studied information that breaks down complex subjects into bite-sized pieces. The Bankrate promise

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You have money questions. Bankrate can help. Our experts have helped you understand your money for more than four decades. We strive to continuously provide consumers with the expert advice and tools needed to make it through life’s financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our information is trustworthy and accurate. Our award-winning editors and reporters produce honest and reliable information to assist you in making the right financial decisions. Our content produced by our editorial staff is objective, factual, and not influenced from our advertising. We’re open regarding how we’re capable of bringing high-quality content, competitive rates and useful tools to you by explaining how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the placement of sponsored products and services, or by you clicking on certain hyperlinks on our site. So, this compensation can impact how, where and when products are listed in the event that they are not permitted by law. This is the case for our mortgage, home equity and other home lending products. Other factors, like our own website rules and whether or not a product is available within your region or within your personal credit score could also affect the way and place products are listed on this website. We strive to offer the most diverse selection of products, Bankrate does not include specific information on every credit or financial product or service. If you’re considering purchasing a used car through a private seller, find out if the car still has a lien on it from an lender. This can make buying more difficult but it’s not impossible. It will mean taking a few extra steps to make sure the lien is eliminated before the title is transferred to you. What a car lien is A car lien identifies an auto loan lender as the principal beneficiary in the title. It’s a legal document that acts as a security for the lender in the event that a borrower fails to pay. The lienholder can utilize the lien as a basis to take over the car which is why they are considered . After the auto loan is completely paid off and the lienholder is released from being liable for the loan and the car is now owned by the lender. How a lien affects your car purchase When you buy a car that has the lien, be sure the lien is eliminated prior to you finalize the payment. If you’re purchasing the car using cash, and you are paying cash, you may be able to negotiate directly with the lienholder in order to pay the balance yourself. Begin by calling the current lienholder to determine the total amount due to be released from the vehicle and other conditions that could affect the sale. Negotiate with the seller. They may be looking to sell the vehicle to make a profit, however If you know the payment amount, you may be able to negotiate a good deal — and avoid paying more than the vehicle is worth. If you’re buying with an loan Getting a loan from your own pocket to pay for the purchase should be fairly simple. It is possible to communicate the details of the acquisition with the lender to make it easier for paying off the lienholder. The remainder , should there be anygoes directly to the buyer. When the lien is completely paid off, either you or your lender will be issued the title and be able to register the vehicle in your name. You or your lender will be listed as the new lienholder until you . If the seller is able to pay off the loan prior to purchase sale can proceed more easily in the event that the person selling the car simply pays off the auto loan and obtains the title before the sale. But this isn’t possible for some people particularly those who owe tens of thousands of dollars on a newer car or those who owe more money 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 be required make payments to the lender $20,000 — three times more than the proceeds through the transaction. In these situations, the seller may choose to convert the remaining auto loan to an unsecure loan such as an individual loan, in order to get the auto loan discharged. To make the purchase legal, however you deal with this scenario make sure you write up a contract that addresses how your lien is disposed of or transferred. While it’s not required in all states, it is still a good idea to create the bill of sale which outlines the transaction. Make sure that it is date-stamped and signed by both parties so everybody has a record that the transaction took place. It is possible to make use of a third party escrow service to manage the financial aspects of the transaction. A escrow service can ensure that the money to be transfered securely. Be aware that escrow firms charge charges for their services- and set it up with the seller in order to ensure you’re both working with a legitimate firm. How to check whether the vehicle you’re purchasing has a lien ? Ask the seller – they should be upfront about the car’s ownership status. You may also look up the VIN or title, as well as the vehicle’s history report to confirm the seller is honest. Look up the vehicle identification number (VIN) with your state’s DMV. If there’s a lienholder on the title or registration, the DMV can inform you. A title search will also provide you with information about liens. The is a good start point for finding the information of lienholders. You should also get a car history report in addition. Autocheck and Carfax have been regarded as two reliable businesses that provide lien history in addition to the previous repairs, maintenance and owners. The bottom line There are plenty of instances when people buy a used car with an unofficial lien from a private party without encountering any issues or challenges. To ensure that the transaction goes smoothly and avoid any major issues, be aware of the steps to take to remove the lien. You should also research pricing and arrange your own auto financing and have any agreements you sign with a private vendor in writing. Find out more


Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal financial, credit card as well as loyalty and insurance issues. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for 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 since late 2021. They are dedicated to helping readers gain confidence to control their finances by providing precise, well-researched and clear details that cut complex subjects into bite-sized pieces.

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