Dubai: Selling a car that is still under a bank loan can be complicated, as the bank holds the car's title. To successfully sell the car, you will need to follow a few extra steps.
According to experts who spoke with Gulf News, you cannot sell or transfer ownership of a financed car until the lender has received the remaining loan balance. In other words, the bank must be paid off before you can complete the sale.
Can you sell a car that’s still under a loan?
According to Madiha Asif, a business analyst and personal lines manager at Nexus Insurance Brokers, it is possible to sell a car that is still under a loan in the UAE but there are certain steps and conditions that need to be followed to ensure the transfer of ownership is handled correctly.
“Selling a car under loan requires the existing loan to be settled before the ownership can be transferred to the new buyer. The bank holds a legal claim on the car until the loan is fully repaid. Getting their approval is essential. Without their permission, you won't be able to transfer the car's ownership to someone else,” she said.
The bank holds a legal claim on the car until the loan is fully repaid. So, getting their approval is essential. Without their permission, you won't be able to transfer the car's ownership to someone else.
Here’s how to sell a financed car
To transfer the ownership of a car under a loan, each bank, loan provider, or financial institution will have its own specific process to follow. However, Asif explained that the usual steps typically include:
1. Inform the bank: Notify your bank of your intention to sell the car. The bank will provide you with the exact loan balance that needs to be cleared.
2. Settle the loan: The outstanding loan must be settled before ownership can be transferred. This can be done by either paying off the loan yourself or arranging for the buyer to pay it off as part of the purchase price.
3. Obtain a loan clearance letter: Once the loan is fully paid, the bank will issue a loan clearance letter, which is necessary for the transfer of ownership.
4. Transfer of ownership: With the loan clearance letter, you can proceed to the Roads and Transport Authority (RTA) in Dubai or the relevant authority in your emirate to complete the transfer of ownership to the buyer.
The outstanding loan must be settled before ownership can be transferred. This can be done by either paying off the loan yourself or arranging for the buyer to pay it off as part of the purchase price.
Can the loan be transferred to the new owner?
Typically, the loan is not transferable. “The loan is tied to the original borrower, not the vehicle,” Asif explains. “The new owner would need to secure their own financing if needed. The original loan needs to be cleared before the ownership transfer can take place.”
What if you can’t clear the loan yourself?
If you don’t have the funds to pay off the loan, you have a couple of options:
Find a cash buyer
Look for a buyer who can pay the full amount in cash and settle the outstanding loan on your behalf.
“If the seller does not have enough money to clear the outstanding loan on the car, they have to find a buyer who is interested to take the car with the loan. You must find a buyer willing to purchase the car in cash and clear the outstanding loan on the seller’s behalf,” Qaiser Abbas, co-founder of Dubai-based car dealership of SellCarUAE, said.
If the seller does not have enough money to clear the outstanding loan on the car, they have to find a buyer who is interested to take the car with the loan. You must find a buyer willing to purchase the car in cash and clear the outstanding loan on the seller’s behalf
You can try to ‘transfer’ the loan but it depends on the bank
Some banks may offer the option to transfer the loan to the new buyer, but this varies from bank to bank. Abbas advised that sellers may need a valuation certificate to ensure the car’s value matches the loan amount.
“If the selling price differs from the outstanding loan, you can ask the bank to settle it using the buyer’s loan, once approved,” he adds.
If the bank approves the transfer, you will receive a mortgage release document, which is necessary to start the ownership transfer with RTA.
“Sometimes, you will get an email or SMS confirmation of the mortgage release, and the RTA will update their system accordingly,” Abbas adds.
Remember: The specific process can vary, so always consult your bank for accurate information.
