# buying used car - seller has a loan on it



## vercingeto (Feb 8, 2012)

Good day folks,

I'm about to buy a secondhand car. The seller wants me to extinguish the loan on the car by paying the financing company.
He wants me to write a check to the finance company then it takes 2 days for the finance company to issue a letter whereby the car is loan free.
So it means I have paid back the loan on the car but I don't have the car as we will need 2 days to do the paperwork. Lots of things can go wrong.
What's your advice and how to protect myself?
Many thanks
Brendan


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## Canuck_Sens (Nov 16, 2010)

That involves trust between the parties. If you feel that he may trick you, you can.
a) engage a contract specifying the terms. The price of the car is X and that from X...1/3X will go to pay off the loan agreed to be paid by the buyer directly. If you pay just remember to write in the cheque that you are buying and that you are advancing the funds.

Let the lender know that the car was purchased and give a copy of the contract and the funds

b) let the lender do the clearing for you. The seller let the lender know he sold the car and ask the lender to do the clearing. You go with the seller grab the contract and give it to them, you pay the full amount to them and they will transfer the car to your name and return the remaining funds to the seller 

Or

You just trust that the seller will pay off the loan and transfer to you. Since it takes two days I think you need paperwork to protect you.

I would go with b


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## vercingeto (Feb 8, 2012)

thanks, what about getting a cheque from the seller for the amount of the purchase that I will give him back when we do the actual transfer?


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## Canuck_Sens (Nov 16, 2010)

Can be done but with b) you are totally safe.


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## saraswat (Apr 28, 2012)

Just wanted to add one thing.. If the seller has a loan on the car via a financing company, then that companies name will be mentioned on the vehicle registration card, and the ownership of the vehicle or anything else to do with the registration cannot be done without the consent of the financier company.. so in a way you are protected...


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## streetspirit (May 12, 2011)

When we bought our car the guy had just cleared the finance himself. But when we went to transfer we couldn't. He had to get an official letter from the bank who provided the finance so that the registration office could clear it off the vehicle record. 

They were thorough and if there had been a loan outstanding it would never have been transferred. So your definitely protected there. As for handing money over. Not so much


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## peterdaemen (May 27, 2014)

*Exactly the same dilemma*



Canuck_Sens said:


> Engage a contract specifying the terms. The price of the car is X and that from X...1/3X will go to pay off the loan agreed to be paid by the buyer directly. If you pay just remember to write in the cheque that you are buying and that you are advancing the funds.
> 
> Let the lender know that the car was purchased and give a copy of the contract and the funds


I am asked to clear the loan, by paying in cash to the Dubai Islamic Bank. Does anyone have a model contract as per the above? Something that would hold up in UAE courts?

Thanks

Peter


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## telecompro (Apr 4, 2013)

peterdaemen said:


> I am asked to clear the loan, by paying in cash to the Dubai Islamic Bank. Does anyone have a model contract as per the above? Something that would hold up in UAE courts?
> 
> Thanks
> 
> Peter


never buy a car with loan remaining out..there is always something hidden that you dont know.. all the best


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## peterdaemen (May 27, 2014)

Such as?

Still looking for that contract model!


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## lookingforanswer (Jan 18, 2015)

peterdaemen said:


> Such as?
> 
> Still looking for that contract model!



Hi Peter, did you find a contract that works in such cases. I'm in a similar situation and can't lay my hands on a contract that can work


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## A.Abbass (Jun 28, 2014)

I have sold 2 cars the same way before leaving Bahrain.

I went with the buyer to the bank, cleared the loan, then 2 days later I got the clearance from the bank and transferred the car. There was 0 guarantee for the buyer, I could have easily re-sold the car again since it was mine already.

One guy totally trusted me and didn't ask for any guarantees. The other guy asked me to send him a sms that I received the amount and that I'm going to transfer the car in his name next week (apparently sms is legal proof in GCC ). 

In both cases I handed over the keys to the buyer when he paid the loan amount.


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## Edino (Sep 22, 2013)

Its very common in the UAE to buy a car that that is still under loan, and the process that I followed as buyer was always very simple. I normally would go with the seller to the finance company (for the 2 occasions I bought a used car it was HSBC).

1/ Check via RTA website if there are any fines, and if any, agree the seller pays the fines
2/ Go with the seller to the finance company, and settle the loan with buyers money, or combined money from the seller and the buyer.
3/ Request an urgent clearance letter (typically 1 hour), and wait together
4/ Go to RTA to make the transfer. At that time pay the remaining money after the transfer is successful

You need an insurance certificate, and you may also need a technical test for the car.

Ps, the finance company charges extra for an urgent clearance certificate, so make sure the seller is willing to pay for that. If not willing, I would personally be quiet reluctant to go ahead with the transaction.


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