does selling a financed car hurt your credit

March 6, 2023
does selling a financed car hurt your credit

Does Selling a Financed Car Hurt Your Credit?

It can be tempting to sell a financed car in order to get out of debt, but doing so can have adverse effects on your credit score.

Why Selling A Financed Car Might Hurt Your Credit

When you sell a car that is still being financed, you may be held responsible for the remaining balance. This is because the lender has a secured interest in the vehicle and will expect to be paid in full. If this debt is sent to collections, it will negatively affect your credit score.

Payment Options

If you are unable to pay off the remaining balance of your car loan, you have a few payment options:

  • Lender Refinancing: You may be able to work with your lender to refinance the loan. This can help lower your monthly payments, making it easier to pay off the balance.
  • Private Buyer: You can attempt to sell the car to a private buyer who will be willing to assume the loan. However, this option is not always available, and the buyer may be turned off by the idea of an existing loan.
  • Trade-In: You may be able to trade-in your financed car to a dealership, but they will likely only give you a small portion of what you still owe on the car. This means you will have to pay the remaining balance yourself.


Selling a financed car can hurt your credit if the remaining balance is not paid off or sent to collections. It is important to be aware of your payment options, and to make sure you have a plan in place before you make any major decisions.

What happens if I don’t pay off a loan before selling my car?

If you do not pay off your loan before selling your car, the lender has a right to pursue the remaining balance and may even take legal action against you. The buyer may also be unable to register the vehicle and receive a clear title until the loan is paid off in full.

What happens if I don’t pay off a loan before trading in my car?

If you don’t pay off the loan before trading in your car, the dealership will usually still accept the trade-in, but any money from the sale of your car that would have been applied to the loan will instead go to the dealership as payment for the loan balance. The remaining loan balance will then need to be paid off by you.

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