Selling a car with a title loan is possible, but you must fully pay off the loan before transferring the title.
When you take out a title loan, the lender places a lien on your car title. This gives the lender a legal claim to the vehicle until the loan is paid in full.
Because of that lien, you can’t transfer full ownership to a buyer right away. To complete a legal sale, the loan must be paid off and the lien removed by the lender. Once that happens, the buyer can register the car in their name and take full ownership.
In this situation, you generally have three options:
Option 1: Use the proceeds of the sale to pay off the title loan
Option 2: Borrow money from a friend or family member to pay off the loan before selling
Option 3: If your title loan lender agrees, the buyer can take over the remaining balance on the loan.
You must know:
Ultimately, paying off your title loan before selling your vehicle is ideal. If this is not possible, check with your lender to see what they allow and evaluate your options for selling your car with a title loan.
How to Sell Your Car When You Have a Car Title Loan:
If you have a title loan on your car, it doesn’t mean you’re stuck with it. There are ways to sell a car with a title loan, just like you can with other vehicle loans but with a few more steps.
So who buys cars with title loans?
Let’s find out.
Option 1: Selling a Car With a Title Loan to a Private Party
When you take out a title loan, you no longer own the title; the lender does. This can make selling your car privately with a title loan tricky, the biggest reason being that buyers typically avoid purchasing vehicles with a lien on the title.
If you don’t have the funds in your bank account and need the buyer’s funds to pay off the title loan, there will be a delay in the buyer getting possession of the title.
This means the buyer must pay you for the car in a private buyer transaction. Then, you can pay off the title loan using the funds from the purchase. To do this, file paperwork with the DMV and the lender to prove you paid off the loan. This allows the DMV to put the title back in your name. This process can take a couple of weeks.
Bottom Line:
While there are many who find a private party agreement like this time intensive and are uncomfortable with the level of trust it involves, there are some buyers out there willing to take it on. If you need to sell the car in a hurry, this may not be your best option.
Make Sure You Do This Process the Right Way:
When selling a car with a lien, always fully disclose the lien to the buyer before the sale and make sure the lienholder is paid.Failing to disclose a lien can lead to legal problems, including lawsuits or, in some cases, criminal charges.
Option 2: Selling a Car With a Title Loan to a Dealer
Before selling a car with a title loan to a dealer, ask your lender if the loan is transferable. If it is, you can transfer the loan to the dealer and wash your hands clean of the car. If not, you must settle the debt before selling a car to a dealership.
Many dealers are familiar with this process. They will contact your title loan lender for the payoff amount to satisfy your title loan balance. Then, the cost to pay off the loan will be subtracted from the car’s value. You can then choose to walk away and purchase a car elsewhere or trade in your vehicle.
Bottom Line:
This option is great if your title loan company allows title loan transfers. It is much quicker, with fewer hoops to jump through for the seller and the buying party isn’t waiting in limbo. Unfortunately, many title lenders do not support this option.
Option 3: Trading in a Vehicle With a Title Loan
The same process is true if you trade in a vehicle with a title loan. You’re essentially selling the car, so you must settle your title loan first. The remaining balance after the dealer pays off your title loan will be applied to your next vehicle with the dealer.
Bottom Line:
As with option two, this is a great choice if you are looking for a simple and efficient sale and your lender allows title transfers. However, you are at the mercy of your lender.
Selling Your Car Isn’t the Only Way!
Oftentimes, those looking to sell their vehicle with a title loan have run into trouble with their ability to repay the loan.
But selling your car isn’t the only way to be free of your title loan. There are other things you can do to make your payments more manageable or even pay the loan down more quickly, including:
Refinance with a Lower Interest Rate
If you want to pay off your title loan balance and your credit qualifies you for a personal loan with a lower interest rate without collateral, you can use these funds to pay it off.
Negotiate with Your Lender
Many lenders will work with you if you are having trouble making your payments according to the loan’s original terms.
You aren’t the only one who benefits from avoiding default. By working with you to restructure your loan terms, your lender can avoid extra paperwork and additional costs related to the repossession process and avoid losing money on the loan by sending your car to auction.
Start a Side Hustle
If you want to get out of your title loan, it may be helpful to temporarily work a side hustle, work overtime, or borrow money from a trusted friend or family member.
Consult a Financial Advisor
If you’re struggling to make payments, consider getting help from a trusted nonprofit organization. They can help you organize your finances and create a plan to make your money go further.
Below are reliable, nonprofit U.S. resources that specifically help borrowers with personal debt, including title loans and payday loans. You may want to consult them before taking any action:
National Foundation for Credit Counseling (NFCC)
Consumer Financial Protection Bureau (CFPB)
Research all of your options:
We encourage you to do your due diligence and research all of your options. Always consider the amount you need, what you are able to afford, and how long you are prepared to pay on the loan.
Title loans are meant to provide relief to those experiencing a financial emergency. The loans are expensive and have high interest rates, so they should only be used as a short-term solution.
Refinancing Your Title Loan With Montana Capital
Are you having trouble repaying your title loan? Refinancing your loan may help.
What does refinancing a title loan mean? Basically, refinancing means replacing a current loan with a new one with different terms.
You can get new terms for your title loan by refinancing with Montana Capital or any other title loans lender, but it doesn’t solve the problem that you’re short on cash.
Refinancing can provide short-term relief by changing your loan terms, but it’s important to review the costs and consider whether it truly fits your financial situation. In some cases, exploring other options or getting financial guidance may be a better long-term solution.
Can You Scrap a Car With a Title Loan?
You cannot ‘junk’ or scrap a car with a title loan. You don’t own the car when you have a title loan, so it’s not yours to scrap. Instead, you must finish paying off the loan, and then you can do what you want with the vehicle when you possess a clear title.
Does a Car Title Loan Affect Your Credit?
Car title loans may affect your credit. That usually depends on the lender you work with. For example, at Montana Capital, we do check your credit history, but we don’t report title loan balances to the credit bureaus.
Can I Get a Title Loan With a Bill of Sale?
You cannot get a title loan with only a bill of sale. You must have the title in your name with all required documents to qualify.
For more information about the title loan process, including documents needed and other requirements, please contact us. You can also apply online and find out how much cash you can receive. It’s fast, secure, and free!
Is a Title Transfer Possible?
Not all lenders allow you to transfer title loans. Always ask your lender before assuming you can transfer it. If your current title loan lender allows for title transfers, Montana Capital Car Title Loans has refinance programs that may be able to help you.
How Title Loans Work?
A car title loan is a short-term loan where your vehicle is used as collateral. To qualify, vehicles must be in the borrower’s name and paid off without any existing debts or liens.
At Montana Capital Car Title Loans, the biggest qualifying factor is your ability to repay the loan. While your credit may be checked, borrowers may receive up to 70% of their vehicle’s current value, even if you have a bad credit score!
You can apply online and get an approval decision within 24 hours or less, all while driving your car for the duration of the loan!
Can You Sell a Car With a Title Loan on It: The Bottom Line
“I want to trade in my car, but I have a title loan.” Don’t let that stop you.
While the process may take a few extra steps, selling your car with an existing title loan is possible, but you must do it the right way to avoid legal issues. Paying off the loan and releasing the lien is required before the title can be transferred.
That may involve a dealer paying off the loan, arranging a private sale that pays the lender directly, or finding another way to clear the balance. With the right approach, selling your car is still achievable.
If you’re facing a financial shortfall, you can apply for a title loan with Montana Capital and receive an approval decision in as little as 24 hours.