Car Loan Guidance

How can I sell my car before my car loan ends?

April 05, 2022 • 6212 views

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.



We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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