Selling while on loan

I know this has been talked about before but I have a specific question about the process.

Is there any risk to buyer or seller in the following scenario?

Say I'm selling my Taco, but I owe a few K on it still. The buyer pays in cash the total price, we make out a bill of sale, and I hand over the keys. (Presumably he brings temp plates? Can he get those easily? If so, I remove the plates and cancel my insurance.) Then the buyer has the vehicle as collateral while I pay the bank and wait for the title. Once title is in hand, I meet with the buyer and sign it over.

Reason I'm asking is that my bank has NO local branches within 1,500 miles. So we can't go to the bank together. I'm hesitant to use an escrow service as that just complicates things. I also can't afford to pay it off outright. But I want to put the buyer at ease.

The loan is not upside-down.

Theoretically, if I just didn't pay off the loan would the bank then go after the buyer who, with the bill of sale, is technically the owner? Or is the buyer protected from this by the fact that the loan is in my name, etc.?

OR are they technically NOT the owner without the title, and so I am still liable if they crash the truck or something?

Thanks and sorry if this is a repeat, I tried searching the forums but all I get are suggestions for escrow, going to the bank, etc.

 

I wouldn’t cancel your insurance immediately. Since you would would still be the owner technically, your bank would require insurance on the truck. I personally wouldn’t trust the new owner to carry that insurance for that period of time - just in case. Can’t imagine that short period would be a lot of money to keep the insurance on it.

 

I would say first off, he wont be able to bring temp plates as he needs registration to get those. Secondly, the loan is still in your name, no matter what. So in the banks eyes, you are responsible for the loan. No matter who has physical handling of the collateral. Essentially, you could do a bill of sale and sell him the vehicle and you still make payments on it. But then the new buyer has a giant paper weight as he/she cannot register it.

Your best bet IMO is to pay off the loan (combo of your $ and the buyers $ if needed) wait for the title and then sign it over.

Justin

 

If you cannot had me a “pink slip” that tells me there is no existing lien, there is no way I will hand you cash.

 

For the best answer I would contact your local DMV office. I am sure you are not the first person to be in the situation they should know the best way to handle it. Each state may do things differently. Good Luck.

 

You can call the bank and they can bring the title to the office. He writes the check to you, notes for payoff, the bank signs the title right to him. Did it with my last truck

 

@m603holden I did the same thing with one of my cars. guy gave me cash, i fronted the rest and the bank signed it over and then i signed it over to the buyer. but in OP's situation, the bank is 1500 miles away. Road Trip??

 

Your questions regarding title and temporary registration vary by state.

Contact your local BMV/DMV for that info. They can easily answer your questions.

In regards to loan pay off and removal of the lien, call your bank. They will tell you what is required for pay off.

Only signers of the loan are liable for debts. So theyll just come after you personally for satisfaction of the lien.

Do not drop your insurance on the vehicle until you get another vehicle. Insurance on that vehicle temporarily covers your next one until a swap. You never want to be without coverage incase you get into an accident where you are harmed and the other person is under or uninsured.
Or even if you are pedestrian hit by a car.

 

OK, thanks for all the quick replies!

I know some people will be uncomfortable with it but I was hoping to find a way (without paying off the loan first) to protect the buyer and make it easier for them. Guess not. I will contact the local registry and see what they have to say.

I don't think I can do this as the bank has no local offices.

This seems pretty standard but it also seems even riskier for the buyer as they have no collateral. Has anyone figured out a way to give the buyer "something" that guarantees for them you'll sign the title over? Or is it usually just the bill of sale?

 

Whoops. Missed that. And the problem is with moving the loan to a closer non affiliated bank is you'll get wacked with a fee for creating a new loan. Same with refinancing...

 

That was going to be my next question. That's a bummer about the transfer fee. Does that apply with credit unions too?

 

Normally credit unions can transfer the title no issue.

 

There’s not a great answer unless you owe less than the car is sold for.

If you can’t sell it for what you owe, I’d either wait and pay down the loan until you get to a point where you can sell it cleanly, or if your credit is good enough, take out a smaller loan for that amount and use that money to pay the loan down to an acceptable balance.

It’s really a shallow market for buyers that want to pay for a used vehicle and have no pink slip available. If you stop paying your payment at any point (say you owe $3k on the loan and it’s $200/month), the car can be repossessed. You having sold it makes no difference to the bank holding the title.

 

That sounds ideal since basically you used the bank as a third party. But would this work if the buyer was paying cash? What reason would there be to use the bank/could you still use their bank as a third party somehow?

 

There must be a simpler solution. People sell vehicles that are not paid off all the time. As suggested above by others, I would contact the bank and DMV and find out how to do this; there has to be a process for this type of transaction. Some banks have working agreements with other banks where you might be able to do the transaction in your home town. I was in a similar situation with a credit union that was 400 miles away; they had me go to a local credit union that they had some affiliation with for this type of thing. It was not a vehicle transaction, but something similar. Or, you might be able to do the transaction at the buyers bank, and let them handle the paperwork.
Sorry I don't have any real info, just an opinion. Good luck.

 

Call your lender and ask them how to handle it.

The registry is not in the banking business. They only transfer ownership, issue plates and collect taxes.