Assume Balance Car – Tips For Sellers And Buyers

Assume Balance Car – Tips For Sellers And Buyers

June 10, 2022 0 By onroadtips


In recent years, assume balance car has become a familiar term among the automotive industry. But what exactly is assume balance, and what benefits that it gives to both the buyer and the seller? 

If you are curious and want to know more about the process, keep reading to understand everything you need.

What is Assume Balance?

‘Assume Balance’ is a common practice in all online car groups and clubs. 

Also known as ‘pasalo’, it is when the original loan borrower sells their vehicle that is still in the middle of its term loan. When a person takes over the auto loan, they assume all of that debt’s responsibilities and keep up with payments on time every month. 

Though auto loans themselves cannot technically be assumable (and make any such deal illegal), many people still go ahead with them despite these restrictions.

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Assume Balance Car Agreement for Sellers

If you cannot afford all the bills and the monthly payments and want to clear out your auto loan mid-term, there are a few options to consider. The first and most common is returning the vehicle to your lender, but you may end up losing all the monthly payments.

As a last resort, you can sell it as an assumed balance with a bank approval contingent on risk levels and potential pitfalls with this approach being known by both parties involved in the agreement.

However, some financial institutions may allow this while others won’t, so make sure before doing anything.

It’s your responsibility, as the mortgage lender, to seek permission and make sure that everything is above board. If the bank gives consent for this process, the buyer needs to submit documents just like any other borrower.

Once it’s all approved by a bank or financial institution, there will be good news! You will be free from your mortgage obligation, and the buyer’s purchase price will be much lower than what we paid on our loan.

The year 2017 has a bad reputation for “assume balance car” cases. Some sellers who were about to default on their loans decided to sell their cars instead of returning them to the bank. As a result, after the buyers ‘paid’ for vehicles, some weeks later, banks took them back. So now, it would be best if both the seller and buyer keep their copies of the bank’s written consent safe.

But what should you do without the bank’s permission? Although you can continue to sell it, this transaction can easily get you in trouble.

The seller risks a lot more in these transactions. For the crime of selling and removing the vehicle out of your place with no permission, the bank can sue you. This will put you in a bad credit rating when the buyer doesn’t make monthly payments.

If you are a seller, the bank will follow you to foreclose on your mortgage and repossess the car when the buyer reneges on their payments. 

That’s because of how this sale was done illegally without consent from lending institutions like banks or credit card companies.

All you can do is request an immediate cessation of the Deed Of Absolute Sale and demand the buyer pay the mortgage. After that, the car will return to you and turnover to the bank.

If the buyer won’t comply, plead, and beg because if you let them go, it will be a very long process with many expensive steps. DO NOT play repo man by trying to take the car away from the buyer. Remember that in this assumed balance agreement, when signing in the Deed of Absolute Sale, you have already signed your rights away. However, if the buyer signs a Chattel Mortgage in your favor, you will be alright. 

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Assume Balance Car Agreement for Buyers

This is your problem as a buyer in assuming a balance car agreement sample. If you want to buy a car, but the bank doesn’t consent, and without their permission, it will be sold to you illegally. To protect your purchase and your rights in this transaction, make absolutely certain that all the payment terms are indicated and the car is still mortgaged to the bank when executing any Deed for Absolute Sale. 

 That way, you can keep your vehicle ownership and take over the rest of the seller’s balance with the lender. It also helps protect against any possible procedural maneuvering of financial institutions.

Some people like to pay the seller in monthly checks, but this is risky if they don’t send their payment on time. 

If you can, arrange to make a payment directly with the bank instead. This will help your purchase be more independent, and no need to rely on the seller’s carefulness.

Now, it’s time for you to take a closer look at this vehicle. If the unit is still under warranty and without outside influence causing damage on its own, then that’s a great deal.

At least buyers are assured they will get their part replaced for free if anything goes wrong with material faults. 

Naturally, consumables such as brake pads, air cleaners, oil filters, etc., will not be included. So inspect these carefully and request the dealership that released the vehicle to see the service record.

About the vehicle, the buyer should check:

  • The tread wear of the tires. Take a small ruler and measure to see if the tread is more than 1.8mm in depth. If not, consider bargaining on a new set.
  • The gearbox. If you have a manual transmission and the car’s miles are under 20000 kilometers, it should be fine. Check with your mechanic to make sure that they can identify how old the vehicle is and whether it has run more than 50000 miles.
  •  ATs can last long if you’re using them as TNVS (transport network vehicle service). A three to five-year old unit should be okay with regular maintenance.
  • You will need to replace the Alternator and Compressor drive belts every three years or after 60000 kilometers run. The timing chains can go up to more than 100000 kilometers, while the timing belts only last for 80000 kilometers.
  • At 20000 kilometers, you should change the brake pads on ATs, and MTs are after 40000 kilometers.
  • Drive the car over humps for the shock absorbers test. If it bottoms out on exit, it’s a sign that you need replacing and may be due for replacement soon as well.
  • The steering wheel’s vibrations can also mean tie rod or rack end problems. Make sure to check these parts thoroughly before anything else.
  • If the bushings make the squeaking and knocking sounds, they probably need a replacement.

Final Thoughts

Above is everything you need to know about assume balance car. Although It can have some risks during the process, you can consider trying it if you need to. 

However, before engaging in such a deal with someone else, remember to ensure your rights and put just as much time and care into the new purchase so that both parties can reap all the benefits from taking part in this type of agreement.

Thank you for reading this helpful article! Also, you might read our writing of any other article like this on Driving. If you have any question, feel free to comment below or contact with!