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 before you ever sell the vehicle. The sales process will likely take a lot longer than if you were selling a car with a clean title.

First, whenever your vehicle has a loan on it, whether from when you first purchased the car or from a title loan company, that lender owns the car and has first rights to the vehicle as the main lienholder. The lender’s name is listed first on the pink slip and they have the actual title to your car. That typically prevents you from selling a vehicle and transferring a title to a new owner, as those steps are often required with any vehicle sale. In most states, such as California and Texas, you must go to the DMV to transfer the title to the new vehicle owner to complete the sale. The bottom line is that it won't happen if you don't have the title!

Selling a Car with a Title Loan On It

The most important thing to know when selling or buying a vehicle is that you can't transfer ownership of a car if it has an existing title loan. Just like if you tried to sell a car still owned by your lender, you won't be able to do that until the loan is completely paid off. You could attempt to work with the title loan company and sell the vehicle to pay down the loan balance. But even then, that's not always an option as your lender would prefer to sell the car on their terms.

When you get a car title loan, your lender is the main lienholder, and the lien won't be released until the balance is fully paid off. Another thing you can try to do is work with your title loan company to refinance or restructure the loan amount and repayment terms. If they agree to refinance your loan, you can have a quicker payoff time and a more reasonable monthly payment. You still won't be able to sell the vehicle as the title still has a lienholder. But in this case, your path to paying off the loan and being able to sell the car is a lot quicker.

We can't stress it enough! Don't try to sell a car if you have an existing title loan on the vehicle. Any buyer will be hesitant to move forward because it's an impossible process to remove a lien, and even if you negotiate a great deal, it will still be a waste of time for both parties. In addition to wasting everyone's time, you may also be committing fraud if you knowingly agree to sell a car that's not yours! Even though the vehicle is registered in your name the title will show that you're not the lienholder and that can constitute identity fraud if you try to misrepresent that in a sale.

To transfer ownership to a buyer, you’d need to work with a lender to release the lien. Once you pay off the loan, your title loan company will provide a lien release to clear the title. After that your car's pink slip will be lien free and you can whatever you want with the vehicle.

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

Again, if your vehicle has an active title loan, it’s not yours to sell. There's simply no way you can complete the sales process with your state's DMV if you don't have the title to your vehicle. Even in the states where the DMV title process is electronic, you won't get very far when the car's title shows your lender as the primary lienholder! 

Even if you are able to sell a car with a title loan, that doesn't mean the matter is closed. Say the buyer discovers the vehicle has a title loan after they buy it. In this scenario, they could take legal action to void the sale. While some people attempt to sell vehicles without a pink slip attached to them, this is not advisable, as sooner or later, the true lienholder of the vehicle will be known.

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 car to the buyer and let them know you're open to ways to tap into the equity on the vehicle.
• Get approval from the lienholder; in this case, your title loan company needs to sign off on the loan. 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 must follow your state's laws that regulate vehicle sales.
• In many instances, the sale proceeds are used to pay off the title loan or registration loan, if applicable, ensuring 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. Another option is to take out a 2nd lien title loan if your original lender allows it. These 2nd lien title loans are not typical and come with huge fees, but they may be an alternative if you can't refinance the original title loan. Call Car Title Loans 123 at 844-567-5011 for more info!