How do you sell your car if it is still financed by the bank?

If your car loan is not paid off, there are a number of steps to take before you can transfer your motor to a new owner

Drivers cannot transfer their car to someone else until their debt is cleared. Jeffrey E Biteng / The National
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Are you planning to sell your car but it is still financed by a bank?

Selling a car that is still being paid for can be quite problematic, as unless the loan amount is fully settled the car is 'mortgaged' to the bank and technically still under their ownership.

This means you will not be able to finalise the sale until you have cleared the car loan. But there are ways around it. Here is a guide to the steps you need to take:

• If the loan is paid off:
If you have cleared the debt, check with your bank that they have electronically notified the RTA that your loan has been settled. You should also request an official release letter from your bank for your records.

• If you are still paying off the loan:

If you afford to clear the balance, then you simply follow the steps mentioned above once the payment is made. However, if you cannot pay it off, there are two routes you can take to ensure you can sell your car:

1. Find a buyer looking to purchase your vehicle through a bank loan, who is willing to use the same bank the car is currently under loan to. If you manage to find a finance buyer, then you need to:

• Notify your bank that you have found a buyer that is looking to finance the car and is willing to have the loan “transferred” to him or her. Unfortunately, not all banks in the UAE allow this, though we have experienced success with lenders such as Emirates NBD, Noor Bank and Dubai Islamic Bank, among others.

• Ask the buyer to apply, and get approval, for a loan from your bank and then provide a valuation certificate proving the value of the car justifies the new loan amount. To secure a valuation certificate, the vehicle's owner must take the car to a bank pre-approved valuation centre to be inspected.

* As you may have agreed on a selling price that is different to your outstanding loan amount, you must then ask the bank to use the buyer’s loan to settle your balance (including any early settlement fees, typically 1 per cent of the loan value).

• at the Roads and Transport Authority in Dubai or Tasjeel in Abu Dhabi.

* Ask the buyer to provide the bank with the new registration card as proof of ownership and a copy of their comprehensive insurance policy for the financed value of the car to close the loan.


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2.  Find a buyer willing to pay off the loan in cash

If you secure a buyer happy to clear the loan on your behalf, there is of course the challenge of assuring them you will indeed transfer ownership of the car after he or she pays off the outstanding loan amount. To do this, you will need to:

• Ask the bank how much is needed to settle your loan including any early settlement fees.

* Sign a seller’s agreement or Power of Attorney that would give the buyer power to transfer the car to his / her name once he clears your bank loan. These documents can be secured through a Notary Public or an authorised supplier of seller’s agreements. We generally prefer seller’s agreements as they cannot be nullified after payment.

• Ask the buyer to meet you at the bank with the money, preferably in the form of cash or a certified manager’s cheque for the value of the car. At the bank, the buyer can hand over the relevant amount to the bank to clear the loan.

• The buyer can take the car home at this point. To complete the transfer of ownership, however, they will be required to go to the RTA once the bank electronically informs the RTA that the car is no longer under mortgage ( this typically requires a few working days).

Raaed Sheibani, is a growth hacker at