If you’re interested in selling a car with a title loan on it, it’s possible, but there are some steps you’ll have to go through first, and it can take longer than it would with a clear title from the start. 

First, when you have any loan on a vehicle, whether the original loan you used to purchase it or a short-term title loan, the lender is a part owner of the car. The lender’s name is probably listed on the title, or the lender may have the actual title. That prevents you from selling a vehicle and transferring a title to a new owner without the lender being paid for the loan balance.

When it comes to who buys cars with title loans, it can be a private party or a dealer, but you have to handle the lien that’s on the vehicle first.

Selling a Car with a Title Loan On It

The biggest thing to know is that if you plan to sell a car with a title loan, you must first pay off the loan. Otherwise, you can’t transfer the title to a new owner. If you still have a title loan on the car, you might also be able to sell it, but it’s a more complicated process.

First, whether you plan to use the money you get from selling a car or you’re planning to finish paying off the loan while your car is for sale, you need to let interested buyers know the situation.

When you get a car title loan, the lender puts a lien on your vehicle's title. That means the title belongs to the lender, as mentioned. Your car is your loan’s collateral, so until you pay off your title loan, your lien isn’t released, so you can’t sell the car yet. Technically, the car isn’t yours to sell.

If you want to sell the car, you have to address the lien, as mentioned, which involves paying off your loan balance so you can transfer a clear title. Another option might be to negotiate with the buyer and the lender to transfer the loan along with the vehicle, but this requires the lender's approval and is complex.

Buyers might be hesitant because a vehicle with a lien is a more complicated process. You could attempt to negotiate a lower price to compensate for the added hassle and risk of clearing the lien.

To transfer ownership to a buyer, you’d need to work with a lender to release the lien. Once you pay off the loan, the title loan lender provides a lien release or a clear title that can then be transferred to the buyer. 

Is It Illegal to Sell a Car with a Title Loan?

Again, if your vehicle has a current title loan since the lender has ownership in it, it’s not yours to sell, so while there may not be a specific law you’re breaking, you could still face legal consequences for trying to do so.

The buyer could be able to take legal action against you for something like fraud or misrepresentation.

If a buyer discovers the vehicle has a title loan after they buy it, they could take action to void the sale or recover damages.

If the car has a lien, the buyer cannot transfer the title into their name.

It’s also ethically a poor decision not to disclose important information about the financial status of your vehicle before attempting to sell it.

You should be honest when you’re trying to sell a car about any liens or loans so the buyer can make an informed decision.

The Steps to Sell a Car with a Title Loan

If you have a title loan on a vehicle and you’d like to sell it, you should do the following:

• Disclose the loan on the vehicle to the buyer.
• Get approval from the lienholder, which is the lender who holds your title loan, to transfer ownership to a buyer. The lienholder may require you to pay the loan in full before they transfer the title, or they might let a buyer take on the responsibility of the loan.
• The title transfer process has to be done following laws and regulations. Depending on the jurisdiction, it could involve submitting paperwork to the DMV or equivalent agency, disclosing liens on the vehicle and getting a new title in the buyer’s name.
• In many instances, the sale proceeds are used to pay off the title loan or registration loan if applicable, which ensures the lien is satisfied and the buyer gets a clear title.

If you can’t pay off a loan before you sell the car, you need to work with a lender and buyer to address the loan during the sales process.

If you’re curious about selling a car with a title loan, the biggest takeaways are to always be transparent with the buyer and work with them and the lender to come up with a solution if you’re not able to pay the loan in full first, which is the ideal option.

If you’d like to learn more about selling a car with a title loan or if any companies buy or refinance these types of loans, we can help you. Call Car Title Loans 123 at 844-567-5011 for more info!