March 24, 2024
Do Charities Accept Cars That Still Have Loans on Them?
Photo by Sachith Ravishka Kodikara under Pexels License
So, after a few weeks of deliberation, you’ve finally decided to part ways with your car by giving it away to charity. You know that supporting a cause close to your heart and getting a tax deduction makes donating your car the best option for you.
However, there’s one complication — you still have a loan on your car. What should you do next? Can you proceed with the donation, or do you need to take certain actions?
Don’t worry — you’re in the right place. Keep reading to find out everything you need to know about donating a car with a loan on it.
The Situation Can Be Complicated
When you take out a loan to purchase your car, the lender typically holds the vehicle’s title until you’ve paid off the loan in full. Technically, you don’t fully own the car until then, which creates a challenge when you try to donate the automobile.
Most charitable organizations that accept vehicle donations usually require the vehicle’s title. It’s the legal document that transfers ownership from you to the charity. You’ll hit a roadblock without it.
So, Can You Donate Your Car or Not?
The short answer is yes. You can still donate a car with a loan on it, but it’s not as straightforward as handing over the keys. Here are three ways to help you make it happen:
- Coordinate with your lender.
You might have a lender that allows you to pay off the remaining balance of the loan when you donate the car. In this case, you essentially buy the car from the lender so you can donate it. - Refinance the loan.
Another option is to refinance your loan to lower your monthly payments. You’ll have an easier time paying off the vehicle before donating it. However, carefully consider this option as it could extend the length of your loan. - Opt for the “payoff and donate” method.
If you have the resources, you could pay off the loan in full, secure the title, and then donate the vehicle. Although this requires a larger immediate outlay, it’s your simplest route to navigate this process.
There you have it! Donating a car, even with a loan on it, is not impossible. It’s a wonderful way for you to support a cause you’re passionate about and, with a bit of patience and planning, you can turn your vehicle into a powerful tool for change.
Can Donating a Car With a Loan Hurt My Credit Score?
No, donating a car with a loan won’t hurt your credit score if you handle it properly. The key is paying off your loan before the donation. Once the loan is cleared and the title is released, your credit won’t take a hit. If you miss payments or stop communicating with your lender, that’s when your score could drop. Stay on track, and you’ll be fine!
How Do Tax Deductions Work When Donating a Car With a Loan?
You can still get a tax deduction for your donation, even if the car had a loan, as long as the loan is paid off first. The IRS lets you deduct the fair market value or sale price of the vehicle. After your motor vehicle is sold, you’ll receive a tax-deductible receipt in the mail. Whether it’s a sedan, SUV, or pickup truck, we’ll help make sure the paperwork is clear for your tax records.
What Documents Do I Need Besides the Title to Donate a Car With a Loan?
Once your car loan is paid off, the title becomes the most important document. But depending on your state, you might also need a release of lien letter from your lender. This shows that the lender no longer owns part of the automobile. Some states may ask for a bill of sale too. Don’t worry; we’ll guide you through every step so you can donate your vehicle with confidence.
Don’t Have a Donation Platform in Mind Yet?
You might encounter a dilemma: Which nonprofit should you donate your vehicle to? If you’ve always wanted to make a difference in the lives of our former military members, then Veteran Car Donations should be your best bet. Your unwanted vehicle can become a life-enhancing tool for them.
We’ll auction off your vehicle and distribute the proceeds to our veteran-focused charity partners. You’ll be contributing to our IRS-approved 501(c)(3) nonprofit organizations who are dedicated to providing support to homeless and unemployed veterans, as well as those suffering from disabilities and serious illnesses, including mental health conditions.
The funds will enable them to provide needy veterans in your area with housing assistance, financial aid, employment opportunities, family support, free quality healthcare, psychotherapy services, educational scholarships, and many other benefits designed to improve their lives.
You’ll also benefit from your charitable act as it will give you the chance to claim the maximum tax deduction in the next tax season. We’ll provide you with the 100% tax-deductible sales receipt of your vehicle within 30 days after its sale.
You might have other unused vehicles taking up space in your garage. Remember, we accept many other vehicle types, including trailers, trucks, motorcycles, boats, golf carts, and farm equipment. Learn more about what we accept here.
For more information on our vehicle donation program, you may head over to our FAQs page. If you have any questions or concerns, feel free to leave us a message here or give us a call at 877-594-5822.
Empower the Struggling Vets in Your Community Today!
After all the sacrifices they’ve made for us, our families, and our nation, there’s no denying that our veterans deserve our support more than ever. When you donate your vehicle to Veteran Car Donations, you’ll help them transition to civilian life with ease. Call us at 877-594-5822 or fill out our secure online donation form now!
Last Updated: July 27th, 2025