My car is being used as collateral for a personal loan. The car isn't worth the amount of the loan. I would like to get a new used car and just give the old one back to the lien holder and still make payments. Is that possible?

My car is being used as collateral for a personal loan. The car isn't worth the amount of the loan. I would like to get a new used car and just give the old one back to the lien holder and still make payments. Is that possible?
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#1

I have a personal loan, for $5k, that I took out when I was married.
The loan is also in my ex-wife’s name.


#2

It's great that you want to pay down debt, and keep making payments on the personal loan -- that's responsible, and that will help your finances.  However, you will probably not get the result you want by turning the old car over to the lien holder.  Whether the note is held by a bank or a finance company associated with a car dealer, they don't really want your old car:  they want your payments. Even if the lien holder agreed to take back the old car they would probably not give you a very good price. You mentioned the car is not worth the amount remaining on the loan; check out KBB.com to verify the value of the old car. Ask the lien holder if they will let you sell the car and continue making payments on the remaining balance; many loan contracts require that if you sell the collateral you will have to immediately pay off the balance.  If so, you can probably get a better price selling the car yourself, and use the proceeds to help pay down the loan. Clean it thoroughly inside and out; even the places you may not normally look like the door sills, around the spare tire, and the engine compartment. To list your car for sale try: 

www.autotrader.com/sell-car

https://www.cars.com/sell

www.edmunds.com/used-cars/

Also, check out this story on selling your used car at:

http://abcnews.go.com/blogs/lifestyle/2012/10/11-tips-on-privately-selling-your-used-car/

Good Luck!


#3

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