If you are facing any monetary urgencies, you can sell your car before finishing the loan repayment. Wondering how to sell a car which is on loan? We have got you covered! You will have to follow six simple steps for this process. Read on to learn about these steps in detail.
How to Sell a Car Which is on Loan?
Here are the 6 simple steps that you should take to sell your car which is on loan:
1. Determine the ‘Payoff’ Amount
It
is the amount that you have to pay while closing the car loan before
transferring the title to someone else. To know this loan amount,
contact your lender directly to ask how much you owe them.
Generally, the payment includes any due interest, fees, and potential
prepayment penalties that the lender may charge.
If your car’s
worth is more than the payoff, the number will be positive, which
means you will walk away from the sale with some money in your pocket.
On the other hand, if the car’s is less than your payoff If your car
is worth less than the payoff amount, you may have to fill that gap by
paying money from your pocket.
2. Reach Out to Your Loan Provider
After making your decision to sell a car, contact your loan provider
and let them know your plan. Discuss the options you have to clear
the dues. Remember that the selling process of a car on EMI may vary
among lenders.
Therefore, it would be prudent to involve the
lender in this process when you have not paid your car loan fully.
With their participation, your car’s buyer will be assured that
nothing is suspicious about the deal.
3. Learn Your Car’s Equity
Your
car’s equity is determined by the payoff amount and its value. To
find it, subtract the payoff amount from your car's value. Here are
two possibilities:
- Positive equity: It happens when your car is worth more than what you owe. For example, if your vehicle is worth Rs. 20,00,000 and you owe Rs. 15,00,000, you have Rs. 5,00,00 in positive equity.
- Negative equity: This is also called an upside-down car loan, which is when your car is worth less than what you owe. If your vehicle is worth Rs. 20,00,000, and your loan balance is Rs. 25,00,000, you need an extra Rs. 5,00,000 to pay off your auto loan.
4. Mode of Payment
It is better not
to take big cash payments. You must ask for the full payment in your
bank account in the form of cheques or demand drafts. Wait for your
bank to say they got the money before selling. After you get the
money, pay your loan and change the car ownership to the new buyer's name.
ALSO READ :- 5 Tips to Make the Used-car Loan Application Process Easy…!
5. Know the Worth of Your Car
You
will be able to determine the value of your car by using various
vehicle valuation sites that include giving all the key information
of your car like the car’s model, overall condition, PIN code of the
area you live and other required information.
6.
Complete Your Transaction
If you are planning to
use the money that you get from the sale of the car to pay off the
loan, you should be able to do it in one go at the bank from which
your loan is taken. Keep in mind, that if you sold the car for less
than the amount owed on the loan, you will be liable to pay up the
difference before the transaction is completed. On the other hand,
if you have sold the car for more, you should get extra after
covering the outstanding amount.
What Documents Do I Need to Sell My Financed Car?
The following are the documents you need to provide to sell your financed car in India:
- KYC Documents - Proof of address, PAN card, and passport-size photographs.
- Car Documents - PUC, RC, car insurance, car invoice, ownership manuals, etc.
- RTO Documents - Form 28, Form 29, Form 30, Form 35, NOC, sale affidavit, clearance certificate, etc.
What Should I Do When the Bank Wants to Payoff Before I Sell My Car?
To get your car ownership from the bank before selling, you will need to pay off the full loan amount. If you have extra money after paying, the bank will give it back. However, if you still owe, you must cover the remaining balance. Here are simple options:
- Refinance Your Car Loan
Get a new loan with lower rates or longer terms to make it easier to pay off and build equity faster.
- Take a Personal Loan
If you have good credit, you can get a low-paying Personal Loan to settle your car loan. Then, send the money to your auto lender to get your title.
- Use Your Savings
If you have savings, use them to pay off the loan. It may reduce your funds, but you avoid paying extra interest and fees, which is good if you have bad credit.
How to Apply for a Pre-owned Car Loan?
If you are thinking of applying for a Used Car Loan, follow the steps mentioned below:
- Step 1: Look for the ‘Apply Now’ button and select it.
- Step 2: Provide your details like full name, phone number, email ID, PAN card number, etc.
- Step 3: Upload the required documents and click on the ‘Submit’ button.
After completion, you will get your loan application within a few minutes.
To Conclude
Now that you know how to sell a car which is on loan, keep in mind that this might take a while. Therefore, you should figure out the time it will take for the whole process. Apply for a Secondhand Car Loan from top NBFCs like Poonawalla Fincorp so you can get complete assistance when selling off your car which is on loan.
Frequently Asked Questions
1. Is it possible to transfer the title of a
financed car?
The title of a financed car can only
be transferred once the entire loan is paid off. The lender, having
the car ownership, will only release it upon full repayment. To
initiate the transfer, visit the Department of Motor Vehicles.
2. Does selling a car which is on loan lower your
credit score?
Selling your car which is on loan does
not reduce your credit score if you have positive equity. However,
in case you have negative equity you have to apply for a Personal
Loan to cover the difference between the value of your car and the
amount left on your loan.
3. Can I transfer my
existing car loan to another person?
Yes, financial
institutions allow you to transfer your existing
car loan to another person provided you meet their requirements.
However, you should review your loan documents beforehand while
transferring this loan.