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How to Sell Your Car When You Still Owe Money On It

written by: M Lambert•edited by: Laurie Patsalides•updated: 3/13/2009

If you owe money on your car, you may be wondering how to sell it. Selling a car means that you transfer the title to the new owner, but it can be difficult to do if you do not have the title or a title with a lien against it. There are simple steps that you can take to make selling your car easier.

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    Sell Your Car

    When you need to sell your car, you may find yourself stuck if you still owe money on the car. The bank or credit union will not release the title until you have paid off the loan in full, and you will need to have the title released as soon as you sell your car. It is possible to sell your car when you still owe money on it. This can help to reduce your debt load, and save you money.

    The first thing you will need to do is determine how much you owe on the car. Then you will need to determine what the car is worth. If you owe less than the car is worth or the same amount, a simple sell and filling out the paperwork at your bank should be enough to have the bank release the title to the new owner. This will determine the correct price for you to sell your car.

    If you owe more than the car is worth you will need to come up with the difference so that you can pay off the loan and have the title released to the new owner of the car. This means that you either need to save the money up or find a place to borrow the difference. Small banks or credit unions are usually the best places to begin. You may also talk to the bank that has the lien on your car and see if they are willing to give you a personal loan for the difference and release the title to the buyer. Once you have secured a signature loan you are ready to sell your car.

    Once you have the additional money in place, you should advertise your car for sell. When you sell the car you need to pay off the loan and have the title ready to be released to the new owner. Each bank has a different way of handling this. Contact your bank to let them know you want to sell your car, and ask the correct procedure for the release of the title so handle the sale correctly. You should also fill out a bill of sale (a receipt) in addition to transferring your title over to the new person. Be sure to allow the money to clear the bank before you do this.

    If you are doing this at a dealership the salesman will likely send money to the bank to have the title released to them for you. This may be the least amount of hassle, but you will not get the best price for your car. Additionally if you purchase the car from this dealer you are rolling your old loan into your new, which means that you will owe more than your new car is worth. The best option is to sell your car yourself. Even if you have bad credit, selling your car will help you avoid bad car loans.