How to Sell a Car With a Loan in Dubai?

Understanding Car Loans in the UAE

A car loan is a type of secured loan where the vehicle itself acts as a collateral. This enables you to borrow money from banks or other financial institutions to finance a vehicle, and you are required to pay back the loan balance in easy monthly installments. 

Here it’s important to note that until the loan is fully repaid, the bank or financial institution technically owns the vehicle. This means you can't legally sell the car without involving the lender in the process.

Can You Sell a Car With a Loan on It? 

Yes, it’s possible to sell a car that still has an active loan in the UAE. However, this requires you to follow certain conditions and steps so that the car ownership can be transferred legally. 

As you know, the bank holds a legal right to the financed car. Hence, it’s important to settle down the loan before or during the sale process.

In the next section, we’ll guide you through the key steps to sell a financed car. 

How to Sell a Car With a Loan in Dubai?

You can consider the following ways to sell a car with a loan on it: 

Clear Your Loan 

It’s the easiest way to sell a car with a loan. You must ensure that the remaining balance is settled before listing it for sale. Once cleared:

• Get the car loan clearance certificate or letter from the concerned bank
• Make sure the RTA updates your vehicle’s status, removing the mortgage tag
• You’re now free to sell your car just like any other used car in Dubai

 

Find a Cash Buyer 

If paying off the loan upfront isn’t possible, you can look for a cash buyer who’s willing to help settle the loan as part of the transaction. To do this, you need to find a buyer who is interested in buying your car in cash. 

Ask the buyer to pay the amount directly to the bank and sign a power of attorney to transfer the vehicle’s ownership. Also, the buyer and the seller are required to visit the RTA office to notify them that the car is free from debt. 

Seek Out a Finance Buyer 

Another alternative is to find a finance buyer, someone who intends to buy your car using their car loan from the same bank. Here is what you need to do: 

✔️Notify the bank

Inform the bank that you have found a new buyer and want to transfer the loan to them. 

✔️Check Bank Availability 

This option is available at very limited banks, so check with them before proceeding with this method. 

✔️Buyer Applies for Loan

Now, ask the buyer to apply for a loan from the same bank. 

✔️ Bank Valuation

The bank will also ask for a valuation certificate to confirm that the loan amount matches the current value of the car.

✔️Loan Amount Vs Selling Price 

If the selling price is different from the remaining loan amount, you can ask the bank to use the buyer’s loan to settle your outstanding balance. Keep in mind that this may include an early settlement fee. 

✔️Transfer of Ownership at RTA 

Once the loan is cleared, you’ll need to transfer the car’s ownership at the RTA.

✔️Buyer’s Documents for Finalisation 

After the transfer, the buyer must provide the bank with their new registration card and a copy of the car insurance policy to confirm ownership. 

✔️Bank Closes the Loan

With this only, the bank will officially close the auto loan process.

✍️Note: This financed car selling process might take longer due to paperwork and approval timelines, but it works well if both parties are patient and the car is in good condition.

Frequently Asked Questions

1. Can I sell my car on loan in Dubai?

Yes, you can sell your car on loan, but for this, you will need to involve the concerned bank. This may require you to clear the loan before selling the car to a new buyer. 

2. Will I be penalized for early settlement of my car loan?

Yes, most UAE banks charge an early settlement fee, typically around 1% of the outstanding amount or a fixed fee.

3. What documents are needed to sell a car with a loan?

Typically, you'll need your Emirates ID, UAE driving license, car registration card, bank clearance letter, passport with residence visa, car valuation certificate and more.

4. What should I need to consider before selling a car with a loan in the UAE? 

To sell a financed car, you must evaluate the car’s value, prepare all necessary documents, and provide a fair car inspection or testing report.