Before you buy a used car from a private seller, you should check for a lien on the title. A car loan can be used to pay off an existing lien on a vehicle you have purchased if the previous owner was unable to finish settling the debt. You will generally encounter unpaid liens on car titles only in private used car sales.
You will not be able to have the title of the car transferred into your name while the lien is still present. If you need financial assistance with the lien, a car loan can be an effective solution.
Working With Lenders
One of the benefits of paying off a lien with a car loan is that the lender will deal with the owner of the lien. When you apply for a car loan you plan on putting toward a lien, the financing company or bank you are borrowing from will forward the funds to the lien holder and initiate the process of having the lien removed. Instead of walking into an existing relationship between the lien holder and whomever you bought the car from, you choose the financing company you want to work with and deal with those lenders.
Subtract From the Asking Price
There is no reason the person selling you a car with a lien on the title should get the full fair value of the car if you are the one paying off the debt. Negotiate the amount of the lien out of the asking price and consider the car loan part of what you paid for the car. This strategy is contingent on the lien being discovered prior to purchasing the car, making the prior research on the car’s vehicle identification number (VIN) even more important.
Be Wary
It is never a good idea to absorb the responsibility for a stranger’s debt. You should be particularly wary of liens placed on a car’s title by any company other than the one financing institution that provided a loan for the car’s previous purchase. Also, never disburse a car loan towards a lien that is worth more than the car is worth. Unless purchasing a privately sold used car saddled with a lien is your only option, the prudent choice is to buy a car from a reputable and professional dealership.
A used car you purchase from a private party may have a lien against the ownership title that will need to be settled before you can have the car titled in your name. A car loan can streamline this process while providing the funds necessary to pay off the lien.
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