My car doesn't have a clean title

Can I refinance my current auto loan?

One of the lesser known requirements is that the vehicle has to have a clean title.  A clean title means that the car doesn’t have any liens against and hasn’t been crashed or materially damaged, stolen, repossessed, or had its odometer rolled back.  

As it relates to auto finance, the new lender will expect that there is a lien against the car, as you are looking to swap out one lender for another.  However, if the car has been damaged, then the lender will not want to put that piece of collateral on its books.

To clarify, an automobile that has a salvage title is a vehicle deemed to be classified as a total loss by an insurance company.  Broadly, a salvage title means that the car isn’t fit to drive.  Because the asset, the car, has been materially altered, banks will not be willing to lend against the damaged collateral. For more context about salvaged titles read ahead. 

Often times, cars with salvage titles can be repaired.  This is fine, but the problem is that many unscrupulous people will attempt to “wash” the title by re-branded the title as clean.  Because there is little oversight of procedures from state to state, these dubious people will move the car across state lines and get a clean title for the car. 

What if you've totaled your car in accident and want to refinance your loan? We think that the same applies in this case. Your title will no longer be clean and you will have a hard time getting a refinance. This is because your collateral, the damaged car, isn't worth very much. Thus, the bank will not lend money to you with a piece of collateral that is close to being worthless.

The bottom line is that vehicles with salvaged or branded titles will not be refinanced.  Their intrinsic value is much less than if the car hadn’t been damaged in the first place.  Therefore the LTV on a salvage title loan (in theory) would be way, way too high for a bank to consider doing.  If you know that you have a salvage title or find out that you do, then your refinancing options are effectively none.