Selling A Car With An Existing Loan.


Selling a Car With an Existing Loan.

Researching the Value of your car and the amount owed on your loan is a great starting point.

Dear Kim,

I just had a counseling session with a Navicore Solutions Certified Credit Counselor. When we discussed expenses, we talked about my car payment. One of the reasons I am having financial  difficulty is because I have a large car payment. Last year, I was shopping for a new car and was persuaded to purchase a car that came with all the bells and whistles. I guess I never thought about how I would be able to afford the payment or the increased car insurance.

I am now in a position where my credit card payments are late and I am having difficulty making my rent payment. The Credit Counselor suggested that I look for a more affordable car, but I have no idea where to begin since I have a loan on this car. Can you help me?




Dear Gary,

I am glad to hear that you are receiving financial counseling. It will furnish you with the guidance needed to improve your financial situation. Your first step should be to contact your car loan lender and request the payoff amount. The payoff amount is the balance needed to be paid in order for you to be able to procure the car title. I also suggest that you research the value of the car. There are several websites that you can use to help determine the value of the car. After you know how much you can sell the car for and how much you need to pay off the existing loan, you have a few options.

The first option would be to bring the car to a car dealer and see if it is possible to enter into a new loan for a much more affordable car. Essentially, you would be trading in your car for something more reasonable. The possible downside of this transaction may be that your existing car has depreciated in value and now you owe more on the car than it is worth. This may be the same situation if you choose to try to sell the car outright to a car dealership. The upside is that the dealership will take care of the transfer of title and payoff on the loan.

Another option would be to sell the car on your own, to a private buyer. This can be tricky because you don't actually have the title to the car. If the lender is located close to where your sale is taking place, you could visit the lender together, pay off the loan and have the title transferred right there. If the lender is not local, you can have the buyer's lender and your lender do a bank to bank transfer of the title. This would mean that the one bank pays off the other directly.

You can speak with your bank about having another party assume your existing loan and have you removed. If the party buying your car has excellent credit and your lender agrees, you may be able to walk away from the car. Not all lenders offer this as an option. Lastly, you may want to consider setting up an escrow account for the sale of the car to protect both you and the buyer. The money would be placed with a 3rd party bank in an escrow account, and once the money has been received, the bank would be notified, allowing the title to be sent to the buyer and the escrow account would be used to pay off your lender. If you choose this option, please make sure that you thoroughly investigate the escrow agency you use; there are quite a few scam escrow agencies. I suggest speaking with your local bank for a recommendation.

I applaud you Gary, for recognizing the need to find more affordable transportation.  Making major changes can be difficult, but I assure you the feeling of having your finances back on track will be well worth it. Please continue to work closely with your Credit Counselor and you will reap the rewards of your hard work!

Thank you,


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Kim Cole is the Education Outreach Coordinator for Navicore Solutions. Kim provides financial education workshops and seminars to communities. Readers can submit general questions relating to personal finance, credit scoring, debt management, student loans, home finance or bankruptcy which may be highlighted in the next month's edition. All identifying information will be kept anonymous.

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