How to Transfer the Title of a Financed Vehicle

by Kate BarberUpdated July 05, 2023
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If you are making payments on your car loan, you are not in possession of the car's title; the lender will remain in possession of the title until you have completed all payment obligations. The two ways around this matter both involve a bit of paperwork. The easiest course is to sell your car for the amount you owe on the loan in order to receive the title. The other option requires negotiating with the bank and car dealer to reach a mutual agreement on title transfer.

Prepare your car for sale by performing basic maintenance duties, such as replenishing fluids and changing the oil. Ensure that the car is in reasonable condition relevant to its age and list for sale accordingly. Determine the sale price by checking the Kelly Blue Book value and comparing your car's condition to the various price points listed in the book. If you owe more on the car than the state Kelly Blue Book value, it is unlikely that you will be able to sell your car for the amount that you owe. Consider keeping the car until you have completed all payment obligations or selling the car for a loss and making a final payment in the amount of the difference in sale price and outstanding loan amount.

Speak with your bank and/or car dealer (depending on your financial agreement) and see whether your loan payments can be transferred to another individual if you cannot sell the car for a lump sum. This is rarely allowed as it requires an extensive underwriting process and is generally not favorable to the person seeking to accept the loan. The conditions of the loan may change depending upon the person's credit and financial background.

Underwriting Definition

Underwriting is the process of assessing a loan applicant's creditworthiness and determining whether to approve or deny the loan. Lenders use a variety of factors to assess creditworthiness, including credit scores, income, employment history, and debts.

Submit a check in the amount necessary to complete your financial obligation to your lender. Choose an overnight shipping service for the quickest turnaround time. Depending on your lender, it may take a few weeks to receive the car title or notarized lien lease. Notify your buyer that he is purchasing a financed car before the sale is made.

Take the car title to the Department of Motor Vehicles (DMV) in your area and prepare the paperwork necessary for title transfer. Specific procedures vary according to the state, so it is best to check with your local DMV office to determine the appropriate steps required. Sign the title in order to release you of responsibility to the car in most instances. File for an Application for Vehicle Title if the bank sent you a notarized lien release, and sign the lease once you receive it from the DMV. Submit the signed title and proof of car sale to the seller so that he may now apply for a title transfer at the DMV.

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