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how to sell a car when you still have an outstanding loan?

how to sell a car when you still have an outstanding loan?

want to sell your car but still has an outstanding debt? read our article to know more about multiple ways of dealing with the car owner.
March 22, 2021
8 min read
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how to sell a car when you still have an outstanding loan

How to Sell a Car when you Still have an Outstanding Loan

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the process of selling a financed car is not complicated; it is simple but time-consuming. when the car is financed, three parties will be part of the deal - you, the owner, the buyer, and the bank that lent you the loan. go through this article if you’re planning to sell your car with an outstanding loan.

Please simplify this. It is very confusing. Also it is not evident that the car is going to be second hand.

clear the loan to remove hypothecation

until you clear the outstanding loan amount, you cannot sell the car. you will need a no objection certificate (noc) from the bank. with this noc, you can remove the hypothecation on the registration certificate (rc).

hypothecation is a declaration that your car has been offered as collateral to the bank against the loan. the bank that lent you money will have their name hypothecated on the rc book. on clearing the outstanding amount, you will get the noc and two copies of form 35. submit the two copies of the form, the noc, and other required documents to the regional transport office (rto). the rto usually takes two to four weeks to remove hypothecation. once it is removed, the car’s ownership is transferred in your name, and you can now sell it freely.

remove the repetition. both the sentences are saying the same thing. In fact you can remove this entirely as you are covering it in the next section.

what if you don’t have the finances to pay the loan?

the first thing you can do is ask the buyer to pay the amount directly to the bank if the car’s price is equal to or less than the balance amount. you will need to pay extra if the outstanding amount is more than the price of the car. ensure that you have a good, trustworthy relationship with the buyer and keep things transparent. the upkeep of your car is crucial because if your car is in excellent condition, the buyer will likely pay the outstanding loan amount.

the second option is to ask the bank not to seize your car, as they will auction it to recover the loan. auctioning the car may result in your vehicle being sold at a lower value, meaning you likely will not profit from the sale, and the proceeds will go towards clearing your dues.

be honest with the buyer and the bank

being honest always pays. be honest with the bank and the buyer, don’t conceal any facts about the car, be transparent. if you hide any information about the car which the buyer gets to know post-purchase, he has the right to file a case against you.


remember that selling a car with an outstanding loan can be time-consuming. calculate and approximately estimate the time it might take to complete the process. you can also use the car loan calculator to calculate the outstanding loan amount and other additional charges levied on loan closure. a car loan emi calculator will also be useful if you plan to buy a new car on loan. follow these steps, and you will be able to sell your financed car in no time.