Can You Scrap a Car Still Under Bank Loan in Dubai? Here's the Truth
- Jun 13
- 4 min read
Scrapping a car in Dubai is a straightforward process—unless there’s a bank loan still attached to it. Many car owners in the UAE find themselves asking, “Can I scrap my car if it’s still under finance?” If you're wondering the same, you're not alone.
At Scrap My Car UAE, we regularly deal with such cases, and this blog will explain everything you need to know, including the legal requirements, risks, alternatives, and how to scrap your car even if it has a loan.
Understanding the Basics: What Happens When You Finance a Car?
When you purchase a car through a bank loan in Dubai, the vehicle is technically owned by the bank until the loan is fully paid off. The bank registers a lien against the car, and this is visible in the traffic file with the Roads and Transport Authority (RTA).
What is a lien?
A lien is a legal right or claim against an asset (your car) to secure the payment of a debt (the loan). Until this lien is cleared, you cannot sell, scrap, export, or transfer the vehicle legally.
So, Can You Scrap a Financed Car in Dubai?
Short answer: No, you cannot scrap a car that still has a loan on it—at least, not legally.
The RTA requires proof of loan clearance before deregistering or scrapping a vehicle. Scrapping a financed car without loan clearance is considered illegal and can result in legal and financial penalties.
What Needs to Happen Before You Scrap the Car
To scrap a car that’s under a bank loan, you’ll need to follow these essential steps:
1. Clear the Loan
The most direct path is to pay off the remaining balance on the loan. Once you've settled the dues:
The bank will issue a loan clearance letter.
The lien will be removed from the car’s RTA file.
2. Obtain Clearance from the Bank
You must get an official letter from the bank confirming that the loan has been fully paid and the car is no longer under finance.
3. Remove the Vehicle from Traffic Records
With the clearance letter, you can approach the RTA and deregister the vehicle. Only then can you legally proceed to scrap it.
What If the Car Is Totaled or Unrepairable But Still Has a Loan?
This is where it gets tricky. Let’s say your financed car has been in an accident, is severely damaged, or is not worth repairing. You might think scrapping it is your only option. But remember:
You still owe the bank, even if the car is unusable.
The car must still be deregistered properly, following RTA procedures.
You may have a few alternatives:
a. Claim Insurance
If your car is totaled due to an accident and you have comprehensive insurance, your insurer may settle the loan with the bank directly.
b. Settle Loan with Assistance
If you can’t afford to pay off the entire loan yourself, you might consider:
Using savings or another loan to settle it.
Asking your insurance provider or a scrap car buyer (like Scrap My Car UAE) if they can help value and buy the car after lien removal.
Why You Shouldn’t Attempt to Scrap It Illegally
Some people are tempted to sell or scrap a financed car under the table. This is highly risky and illegal in the UAE.
Risks include:
Legal action from the bank.
Fines and penalties from the RTA.
Being blacklisted or facing a travel ban.
Potential criminal charges for fraud.
It’s not worth taking the chance.
Can Scrap My Car UAE Help If My Car Has a Loan?
Absolutely. At Scrap My Car UAE, we understand that dealing with bank loans and damaged cars can be overwhelming. Here’s how we help:
✅ Free Consultation
We’ll walk you through the process based on your specific case and vehicle status.
✅ Loan Valuation Advice
We can help you determine if it’s worth settling the loan based on your car’s scrap value.
✅ Coordination With Legal Channels
We provide document support and guide you through the RTA deregistration process after loan clearance.
✅ Fast Car Removal
Once the loan is settled and you’re cleared to scrap the vehicle, we offer free pickup, fast towing, and instant cash for your car.
Call or WhatsApp us today at 055 745 83 22, or visit scrapmycarUAE.com for assistance.
Tips for Clearing a Car Loan Before Scrapping
If you're serious about scrapping your financed vehicle, here are some tips to speed things up:
✅ Get Your Loan Balance Statement
Contact your bank and request a final settlement amount with a valid payment window (usually 7-14 days).
✅ Consider Selling Parts
You might be able to sell working parts (if allowed) and use the money to help settle your loan.
✅ Discuss Options With Scrap Buyers
Some buyers, like Scrap My Car UAE, can offer you a scrap quote that helps you determine whether clearing the loan is financially worth it.
What Happens After the Loan is Cleared?
Once you've paid off the loan and received a clearance letter:
Visit the RTA to remove the lien and deregister the vehicle.
Submit a request to scrap the car, along with the clearance documents.
We’ll take it from there—Scrap My Car UAE will arrange towing, provide instant payment, and handle final documentation.
Final Thoughts
Scrapping a car that still has a loan on it is not allowed in Dubai unless you first settle the loan and deregister the car. While it might feel like a lot of work, you don’t have to go through it alone.
Scrap My Car UAE is here to help car owners in the UAE navigate the legal and financial process of scrapping vehicles—whether damaged, old, or beyond repair.
Let us make the process smooth, legal, and profitable for you.
📞 Call or WhatsApp: 055 745 83 22🌐 Website: scrapmycarUAE.com📱 Facebook: scrapmycarUAE
FAQs
❓ Can I scrap a financed car if I stop paying the loan?
No. The car will still be under the bank’s lien. Even if the car is unusable, you’ll still owe the remaining loan.
❓ What if the car is impounded or damaged?
You must still clear the loan before scrapping. Some insurance policies may cover accident damage—check with your provider.
❓ How long does the loan clearance and scrapping process take?
Typically 1–2 weeks, depending on how quickly you can obtain the loan clearance letter and deregister the car.
