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Buying a car with a lien Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering interactive financial calculators and tools that provide objective and original content, by enabling you 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 products that are featured on this website are provided by companies that compensate us. This compensation can affect the way and when products are featured on this website, for example, for example, the sequence in which they appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage home equity, mortgage and other home lending products. But this compensation does have no impact on the content we publish or the reviews that you see on this site. We do not cover the universe of companies or financial deals that might be open to you. Alfa Photostudio/Shutterstock

3 min read Published 27 October 2022

The content is written by Holly D. Johnson Written by award-winning writer, author and author Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. As well as writing on behalf of Bankrate and CreditCards.com, Johnson does ongoing work for clients that 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 since late 2021. They are passionate about helping readers gain confidence to take control of their finances by providing clear, well-researched information that breaks down complicated subjects into bite-sized pieces. The Bankrate guarantee

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You have money questions. Bankrate has answers. Our experts have been helping you manage your money for more than four years. We continually strive to provide consumers with the expert guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate follows a strict standard of conduct, so you can rest assured that our content is truthful and reliable. Our award-winning editors, reporters and editors provide honest and trustworthy content to help you make the best financial decisions. The content we create by our editorial staff is honest, truthful, and not influenced from our advertising. We’re open about how we are able to bring quality content, competitive rates and helpful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or when you click on specific links on our site. So, this compensation can influence the manner, place and when products are listed in the event that they are not permitted by law. We also offer mortgage home equity, mortgage and other home lending products. Other elements, like our own rules for our website and whether or not a product is available within the area you reside in or is within your personal credit score could also affect how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include details about every credit or financial product or service. If you are considering buying 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 however, it’s not difficult. This will require a few extra steps to make sure the lien is cleared prior to the transfer of title to you. What exactly is a car loan? A car lien names the auto loan lender as the principal beneficiary on the title. It’s a legal document which acts as a protection for a lender when a borrower is in default. The lienholder can utilize the lien to take over the car and that is the reason why they are considered . Once an auto loan is paid in full and the lienholder is released from any loan and the car is owned in full by the person who borrowed it. How a lien affects the purchase of your car If you buy a vehicle with an attached lien, make sure that the lien is gone before you complete the payment. If you’re purchasing the car using cash, and you are paying cash, you may be able to work directly with the lienholder in order to pay the amount yourself. Begin by contacting the lienholder who is currently in charge to determine the amount required to get the car released and other conditions that might affect the sale. Negotiate in conjunction with your seller. They may be looking to sell the vehicle in order to earn a profit. However, when you know the purchase amount, you might be able to get a good deal — and not pay more than the car is worth. If you’re purchasing with the help of a loan getting the loan that you own to pay off the loan should be relatively easy. It is possible to discuss the details of your acquisition with the lender to make it easier for paying off the lienholder. The remainder , if there is any — goes directly to the buyer. When the lien is paid in full, either you either or your lender will be issued the title that will allow you to register the vehicle in your name. The lender will be identified as the new lienholder up to you . If the seller pays off the loan prior to purchase sale can proceed more easily if the seller of the vehicle pay off the auto loan and obtains the title prior to selling. 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. For instance, if the seller owes $20,000 on the car which is privately sold for $17,000, they’ll still need to pay the lender between $20,000 and $3000 more than what they’ll receive out of the deal. In these situations the seller can choose to convert the remaining auto loan into an unsecure loan such as one that is a personal loan, in order to be able to have the auto loan cancelled. The purchase should be made official. However you handle this situation make sure you draft the contract which outlines how your lien is disposed of or transferred. While it’s not required in every state however, it’s an excellent idea to draft the bill of sale which outlines the transaction. Make sure that it is dated and signed by both parties so everyone is aware about the purchase. You may be able to utilize a third-party escrow service to manage the financial side of the transaction. An escrow service will help make sure that the cash to be transferred securely. Just be aware that escrow firms charge fees for their servicesand then set up the service with the seller in order to ensure that you’re using a legitimate business. What can you do to determine whether the car you’re buying is a lien? Ask the seller — they must be honest about the car’s ownership status. It is also possible to check the VIN, title and vehicle history report to ensure that the seller is being honest. Check the identification number of the vehicle (VIN) with the state’s DMV. If there is a lienholder on the title, the DMV can provide you with. A title search can also provide information about lienholders. The is a good place to start looking for the information of lienholders. You should also get a car history report as well. Autocheck and Carfax are both well-known businesses that list lien history alongside previous maintenance, damage and owners. The bottom line There are plenty of instances when buyers purchase a car with a lien from a private party without encountering any difficulties or problems. To ensure that the transaction goes smoothly and avoid any serious issues, you should know the steps you need to take to get rid of the lien. You should also research pricing for your own auto financing and get any agreements you make with a private vendor in writing. Find out more


Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal finances, credit cards, loyalty and insurance topics. Alongside writing content for Bankrate and CreditCards.com, Johnson is also working with clients which 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 dedicated to helping readers gain confidence to control their finances through providing concise, well-researched, and well-written details that cut complicated topics into digestible pieces.

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