What happens if I sell car or other product before repaying loan?

A large number of people today take car loans in order to fund the purchase of a new or a used car. Loans are also available in UK for other high ticket items like refrigerators, televisions, home appliances etc.

If you have taken a car loan or any other product loan and have not yet repaid it in full, you would not have the full ownership of the product if it is a secured loan.

Car loans are secured

One of the first things that you should understand before you take a car loan is that it is a secured loan. What this means is that the loan amount that you borrow from a lender would be secured against the car itself. In the event that you fail to repay the loan in full, the lender would be able to repossess the car and then sell it off to recover the money.

The same is true for any other type of secured loan, whether it is a personal loan or any other kind of product loan.

Can you sell the car before the loan is paid?

You would not be able to legally sell the car before the loan has been repaid in full. With a secured loan, the ownership of the car or of the product concerned would be with the lender until the loan has been repaid.

In the case of a car, the registration documents of the car would be with the lender and would only be returned to you when the loan has been repaid. If you sell off the car without the registration documents before the loan has been paid, the lender can seize the car from the buyer.

An action of this nature can also result into a law suit and so it must be avoided.

You will also require an NOC or a No Objection Certificate from the lender or the bank before you would be able to sell the car, even after the loan has been paid. The fact also applies to other forms of secured loans.

As a borrower, this is a very important point that should be kept in mind to avoid any legal problems in the future.