While a title loan can be a handy source of quick cash, it also gives the lender an interest in the ownership of your car. In most cases, this isn’t really a problem. After all, paying the loan according to the terms of the agreement makes everything work out in the end. 

But what if something comes up and you need to sell the car before the title loan is paid off?

Can you sell your car with a title loan on it?

How Title Loans Work

Title lenders accept the title to your car as collateral for what is usually a short-term loan. In other words, you pledge the title to your car in exchange for the money a title loan provides. This effectively grants the lender a partial ownership interest in the car. Which, by the way, also happens when you get a car from a dealer and use a bank, credit union or finance company to fund the transaction. 

In other words, your name might be on the title as the registered owner of the car, but the legal owner is the financial institution that provided the money to complete the transaction. Each of your monthly payments gets you a bit closer to actual ownership of the car. Once the loan is paid in full, the title “transfers” to you from the lender and you become the legal owner of the car. 

Similarly, a title loan grants a portion of the legal ownership of the car to the title lender, until that loan is paid off. 

Selling a Car with a Loan Against It

The only thing all lenders want is to recoup their investments and make a bit of cash for their trouble. Thus, lenders don’t really care what you do in terms of selling the car if you repay the loan in full before asking for the title to be transferred to the new owner. This is just as true for title lenders as it is for banks, credit unions and finance companies. 

However, this fact might also mean a slight delay when it comes to transferring the title to the purchaser of the car. In many cases, the lender will need to make sure payoff funds clear before they will release the title. In turn, the DMV will only do a title transfer after they get authorization from the lender to do so.  

Ultimately, what this means is that yes, you can sell a car with a title loan on it — if the title lender is made whole either before or during the sales process. Simply put, you must pay off the title loan to sell the car to another person. One way to do this is to make sure the proceeds from the sale of the car are enough to satisfy the loan — and hopefully put some money in your pocket too. 

A Lot Depends on The Car’s Value

The amount of equity you have in the car will make a huge difference in terms of your options in this regard. If you owe less than the car is worth, you have positive equity in it. You can usually sell the car, pay off the loan(s) and walk away with cash. 

In situations in which the outstanding loan balance is greater than the value of the car, you have negative equity. You’re going to have to make up the difference between what is owed and what the sale of the car can bring. In other words, you’re going to have to add some money to what you get from selling the car to pay off the loan. 

You’re also going to have to come up with some more cash to get another car.  In such instances, selling the car might be a bad idea until you get the loan(s) paid in full on your own. 

So again, yes, you can sell a car with a title loan against it. You just must make sure the title loan gets paid off as part of the process of selling the car.