You may have the desire to sell your car, but you still have an outstanding loan that you need to pay off. If the value of your car exceeds your loan balance, you won’t have any issues selling the car and paying off the loan. However, if your loan balance exceeds your car’s market value, you will find yourself in an uncomfortable position where you owe more than you own.
Sell the Car Yourself
Selling the car yourself can help you break the cycle of excessive debt on your vehicle. It may take some work, but it can save you a lot of money on interest, and you might get a higher price for the car. Here’s how to do it:
First, you should determine your car’s value. Start with a reliable source like Kelley Blue Book. Look at the private seller value, as you may get a higher price for your car by selling it to a private party. While considering the criteria, be honest about the condition and value of your car. This review will help you determine the true price for sale. You may also choose to list the car for a price a few hundred dollars higher than the asking price so you can negotiate down.
Determine the current amount of the loan you owe. If you owe more than your car is worth, subtract the selling price from your loan amount. You will need to cover the remaining amount to pay off the loan and sell the car. Contact your bank or financing company and let them know that you will be selling your car. Ask how you can get the title from them upon sale. Often, banks and other lenders keep titles in a central location, and it may take a few days to receive the car title paperwork.
Next, calculate the difference between the loan amount and the amount you expect to sell your car for. If you do not want to resort to savings, you will need to obtain a loan. Talk to credit unions or banks in your area to see if you qualify for an unsecured loan. Although it may seem like you are borrowing money to get out of debt, you have actually reduced the amount owed by selling the car – and you will be able to pay off that smaller loan faster.
Finally, put your car on the market. You can use online resources such as eBay, Craigslist, or Autotrader. You can also list the car in local newspapers or appropriate sites in your neighborhood, including local gas stations. If you do not receive any responses, you may have priced the car too high, and you should consider lowering the price.
Refinancing Your Car Loan
You always have the option to convert your old loan into a new car loan and trade in your current vehicle. Although this option will worsen your financial situation, at least you will have the benefit of a new car that may retain more value.
Talk to your dealer about financing with them. Most banks will not finance you for a new car loan if they need to give you a loan that exceeds 100% of your new car’s value. Once you have your new car and loan, you can always refinance with a bank after paying the loan to an amount less than the market value of your car.
Refinancing Your Car Loan
You may attempt to refinance your current car loan so that you have a lower interest rate and smaller payments. If you want to pay it off faster, you can shorten the loan term, or you can increase the amount you are currently paying and pay off the loan faster. You can also lower your car payment by extending the refinancing term for additional years, but you will also pay more interest. If you have missed some payments, you may not qualify for a car loan.
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Additional Tips
Once you find a buyer, go to your car lender’s office with the money. You should have the loan amount, along with the money from the buyer – before accepting cashier’s checks, money orders, or cash. The lender will fill out the paperwork to transfer the title to the new owner.
If you need to buy a car to replace the one you owe money on, look for an older car in good condition that costs you just a few thousand dollars. You should be able to find a reliable car in this price range. You can drive this car for a year or two until you pay off the debt. These options should make sense because you may not qualify for a car loan if your credit score is poor.
Make it a goal to pay cash for your next car. This method is one of the most important things you can do to build financial security and reduce the monthly payments needed to pay off debt.
Source: https://www.thebalancemoney.com/how-to-sell-my-car-when-i-still-owe-money-on-it-2385872
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