How to Get Rid of a Car With a Title Loan

If you're in a position to be borrowing against the value of your car using a title loan, the next logical step toward stabilizing your finances may be to sell the vehicle outright. Doing so means you'll have to set a price high enough to pay off the balance and make arrangements to settle your debt with the proceeds. Once the loan is satisfied, you'll get the clean title to transfer to the buyer.

Sale Process

You're allowed to sell your car with a title loan, as you retain ownership of the vehicle. However, you'll generally have to notify the lender beforehand and may have to obtain written consent depending on the law in your state.

As with any other auto loan, a lien against your car from the title company has to be satisfied before you can sell it. If you can't pay off the lien beforehand, you'll do so at the same time as the sale takes place and arrange for the delivery of a clean title to the buyer. One tricky point with a title loan, however, is that the interest charges often reach triple-digit percentages, meaning that the lien amount can rise quickly. Call your title lender to get the payoff amount and the date that new charges will be applied. If the transaction doesn't clear before then, you'll need to budget for more money to repay the balance.

Upside-down Loans

The situation becomes murkier if you owe more on the title loan than the vehicle is worth. Though most title loan companies don't approve loans for anywhere near the value of the car to guard against this eventuality, it might arise if the car suddenly breaks down and becomes undriveable. If that happens, the lien can prevent you from selling the car for less than the balance owed unless you can pay the difference. You'd have to find another way to make up those funds before the sale can go through.

If you simply want to be rid of the car, your responsibilities depend on your state regulations. Surrendering the title and keys doesn't always release you from your obligation; the lender can come after you for the remaining balance after the sale in some cases. If the vehicle sells for more than you owe, some states require the lender to refund the balance, while others allow it to retain the full amount of the sale price.