Have you ever been in a situation when you have selected a car to buy, and the moment you are about to finish the paperwork, you come to know that the car is still financed, which means there is a lien on it. Does this term sound unfamiliar? Well, don’t worry because we will brief you about the lien and whether you should be buying a car with a lien or not. Moreover, we will also discuss how to sell a car with a lien.
What is Lien
Lien is an official document that ensures your lender that you will pay off the debt. However, if you are unable to repay the loan, or miss any payment, the lender is entitled to legally claim your vehicle. On the contrary, the day you pay the full payment of your car loan, your lender will clear the lien from the vehicle.
For instance, when you want a loan from the bank, you may have to provide some collateral as security. Similarly, when you purchase a car through auto finance, the lien acts as the collateral for your financed car, and as a security for the lender.
As of now, you’ve understood what lien is. Let’s discuss whether buying a car with a lien or selling it is a good idea or not.
Buying a car with a lien
When it comes to buying a car with a lien, you must keep some considerations in focus. It is important to note that you cannot buy a car with a lien. If you still want to buy that vehicle, you must first clear the title of the car, and only then you will be able to buy it.
However, to clear the lease of the car, you will have to make payments with two checks. One check will go to the lender and the other check will go to the owner. Once you clear the lien payment, you will then have to contact the lender and inform them. They will then clear the title of the car and will entitle the real owner.
As soon as the car gets off a lien, then you will have to pay the remaining amount to the owner, and they will entitle you as the sole owner of the vehicle.
If you ask us, should you buy a car with a lien, we would recommend not to. Firstly, here’s too much hassle involved, and secondly, why pay the loan for someone else when you can get an auto loan yourself, and buy a vehicle directly from the manufacturer. However, if you have a bad credit history, then this option may be suitable for you.
Let’s have a look if you get an option to sell your car with a lien.
Selling a car with a lien
You must have gone through situations where you were in dire need of cash. There is nothing to be ashamed of as many had to go through this situation due to the pandemic.
If you were to sell your asset, then you would have considered selling your car first.
However, many Americans buy cars via auto finance, which puts a lien with a vehicle. If you also happen to own a car with a lien, but the crisis has left no other option, other than selling it, then you should read the following paragraphs to learn how to sell your car with a lien.
To get started with the process, first, you will have to know about the current market value of your car. Secondly, you’ll need to figure out how much loan is left. To figure out the market value of your vehicle, you can go to any third-party trusted resources such as Kelly Blue Book or Edmunds.
Once you calculate the current market value of your car, you may find out that the value won’t cover your loan payoff due to negative equity. If that is the case, then you must contact a debt relief specialist for further assistance.
However, if you have negative equity, you can still sell your car with a lien. To carry forward the process, find a buyer, who is ready to buy your car with a lien. You should pay off your loan before selling your car with lien to the new buyer. If you fail to repay the loan, you will have to face the consequences.
If you won’t pay off your loan, the lienholder, will not entitle you as the car owner, then you cannot sell your car.
However, in this case, you can use Escrow Service. It is a third-party resource that will protect the interest of all the parties involved. Moreover, they will also help you with the necessary paperwork, while they will also oversee that you make your loan payments on time. To find out more about Escrow Service you can go here.
Before we conclude this article, we would like to give you a piece of advice. We know that you may need the cash, but selling your car with a lien won’t benefit you, as according to the law if your car is with a lien, your lender is entitled to force you to pay the money.
However, if you are selling your car with a lien to pay off the debt, and the market value of your car will serve the purpose, only then should you consider this option.
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