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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 smarter financial decisions by offering you interactive financial calculators and tools that provide objective and original content. We also allow users to conduct research and compare information at no cost and help you make sound financial decisions. Bankrate has partnerships with issuers, including but not restricted 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 pay us. This compensation may impact how and when products are featured on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law. This applies to our mortgage or home equity products, as well as other home lending products. But this compensation does affect the content we publish or the reviews appear on this website. We do not cover the entire universe of businesses or financial offers that may be accessible to you. Alfa Photostudio/Shutterstock

3 min read Published October 27, 2022

Written by Holly D. Johnson Written by an award-winning author, writer and author Holly Johnson writes expert content on personal finances, credit cards as well as loyalty and insurance issues. In addition to writing for Bankrate and, Johnson is also a freelance writer for clients which include CNN, Forbes Advisor, LendingTree, Time Magazine and other publications. 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 the confidence to take control of their finances with concise, well-studied information that breaks down complicated subjects into bite-sized pieces. The Bankrate guarantee

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They ensure that what we write is objective, accurate and trustworthy. We have loans reporters and editors are focused on the points consumers care about the most — various types of loans available as well as the best rates, the best lenders, ways to pay off debt and more — so you’re able to be confident about making a decision about your investment. Integrity of the editing

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You have money questions. Bankrate has answers. Our experts have helped you understand your finances for more than four years. We strive to continuously provide consumers with the expert advice and tools needed to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct standard of conduct, so you can rest assured that our information is trustworthy and reliable. Our award-winning editors, reporters and editors provide honest and trustworthy content that will help you make the right financial choices. The content created by our editorial team is factual, objective and uninfluenced through our sponsors. We’re transparent about how we are in a position to provide quality content, competitive rates and useful tools for you by explaining how we earn money. is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services or by you clicking on specific links on our website. So, this compensation can influence the manner, place and in what order items are displayed within the categories of listing in the event that they are not permitted by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether or not a product is available within your area or at your own personal credit score can also impact how and where products appear on this site. While we strive to provide an array of offers, Bankrate does not include specific information on every credit or financial product or service. If you’re thinking of buying a used car through a private seller check if the car still has a lien on it from the lender. This can make the purchase more difficult but not impossible. It will mean taking additional steps to ensure that the lien is eliminated prior to the transfer of title to you. What is a car lien? A car lien lists an auto loan lender as the primary person on the title. It’s a legal document which acts as a protection for a lender in the event that a borrower fails to pay. The lienholder can use the lien as a basis to take possession of the vehicle and that is the reason why they are considered . After an automobile loan is fully paid off, the lienholder is free of the loan and the car is now owned by the borrower. What happens when a lien is affecting your car purchase When you buy a car that has a lien, ensure that the lien is removed before you make the final 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 off the remaining balance on your own. Begin by contacting the lienholder in question to find out the exact amount needed to release the car as well as other stipulations which could impact the sale. 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 get the best price and not pay more than the car is worth. If you’re purchasing with an loan getting a loan of your own to pay for the purchase should be fairly simple. It is possible to share the details of the transaction with your lender to make it easier for paying off the lienholder. The remainder , should there be any- goes to the seller. When the lien is paid in full, you either or your lender will receive the title to record the vehicle in your name. You or your lender will be listed as the lienholder new until you . If the seller repays the loan prior to the purchase, the sale can proceed more easily in the event that the person selling the vehicle simply settles their auto loan and obtains the title prior to the sale. However, this option isn’t feasible for certain individuals particularly those who owe tens of thousands of dollars on a newer car or those who owe more than what the car is worth. If, for instance, the seller owes $20,000 for a car that sells privately at $17,000, they’ll still need be liable to the lender between $20,000 and $3000 more than what they’ll receive from the sale. In such cases the seller could decide to the remainder of the auto loan to an unsecure loan, like an individual loan, in order to have the auto loan cancelled. To make the purchase legal, however you handle this situation ensure that you draft an agreement that outlines how your lien is eliminated or transferred. Although it’s not required in all states, it is still an excellent idea to draft the bill of sale which outlines the transactions. Make sure that it is authenticated and executed by both parties so that everyone is aware of the sale. You might be able to utilize a third-party escrow service to manage the financial aspects of the transaction. An escrow service will help make sure that the cash for the sale is transfered securely. Be aware that escrow providers charge fees for their services — and set it up with the seller in order to ensure you’re both working with an authorized company. How to check whether the vehicle you’re purchasing has a lien Ask the seller – they should be transparent about the car’s ownership. You can also check the VIN as well as the title and history report to ensure that the seller is being honest. Check the identification number of the vehicle (VIN) with your state’s DMV. If there’s a lienholder listed on the title or registration, the DMV can inform you. A title search can also give you information on liens. This is a great start point for finding lienholder information. You should also get a car history report as well. Autocheck and Carfax are two well-known companies that list lien history alongside the previous repairs, maintenance and owners. The bottom line There are plenty of instances when buyers purchase a car with a lien from an individual without having any issues or challenges. To ensure that the process runs smoothly and avoid any major issues, be aware of the steps to take to clear the lien. Also, you should research the cost and arrange your own auto financing , and get any agreements you make with a private seller in writing. Learn more


Written by Author, Award-Winning Writer Holly Johnson writes expert content on personal finances, credit cards, loyalty and insurance topics. Alongside writing content on behalf of Bankrate and, Johnson writes for clients on a regular basis which include CNN, Forbes Advisor, LendingTree, Time Magazine and more. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to manage their finances through providing clear, well-researched facts that break down otherwise complex topics into manageable bites.

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