When you take one outcar loan, your lender will be listed as the lien holder on the title. This gives your lender legal rights to your car, especially if you default on the loan.
After you make your final payment, you will need to request the title from your lender to prove that you legally own the car. In some states, getting your title after you pay off your loan is an automatic process. In other cases, you may need to file paperwork with the Department of Motor Vehicles. Either way, expect to wait a few weeks for your title to be transferred to your name.
What is a car title lien
A car lien is a note proving that your vehicle islegal property of another party- in many cases your lender. A lien on your car is equivalent to a lien on your home. With a lien, the lender has rights to the vehicle until you repay your loan.
The title is released to you when your loan is paid in full. At this point, legal ownership of the car is transferred from your lender to you.
How do I get my title after I pay off my car?
Once you have paid off your car loan, the mortgage holder must notify your state's Department of Motor Vehicles. The process depends on whether you live in a property state or a non-property state. Some states take care of it automatically, while others require you to do some grunt work.
“Once you pay off your car loan, you will have a 'free and clear' vehicle title, meaning you now own your car outright,” says Julie Shinn, vice president of lender management atRate genius. “Anytime there are changes in ownership, you need to update the title.”
In some cases you can transfer your title electronically. The Electronic Lien and Title (ELT) system is a simplified process that takes significantly less time, but not all states use it. If your state doesn't, you or your lien holder may have to file paperwork by mail or in person.
Regardless of what your state uses, you must notify your state that you no longer have a balance on your loan and are the sole owner of the vehicle.
In ownership condition
If you live in a title state, you are responsible for your car's title. It must identify both you and the mortgage holder. Once your loan is paid off, you will need to update the paperwork with the DMV or other state office.
According to Shinn, your lender will send you a lien release in states that require you to file to obtain your title. It won't take longer than 30 days, so check with your lender if it's too slow.
The lien release contains formal documentation proving that the loan has been paid in full. Once you have it, your state may require you to submit physical paperwork – by mail or in person. Alternatively, you may be able to submit your information electronically if your state uses the ELT system.
Only nine states allow the owner, rather than the lien holder, to hold the car title. These include:
- Kentucky
- Maryland
- Michigan
- Minnesota
- Missouri
- Montana
- New York
- Oklahoma
- Wyoming
In a state without property rights
For most Americans, your lender will hold title for the life of the loan. Once your loan is repaid, your lender will send the lien release to the DMV. The DMV or other state office will then send you the updated title.
This process may take longer than in a proprietary state. However, you may not have to file much, if any, paperwork. Once notified, the DMV will automatically send you the title to your car without you having to do anything.
You will still need to stay in touch with your lender throughout the process to ensure this happens on time. In general, you can expect it to take approximately two to six weeks before you receive your title.
As with title statements, things will go faster if your lender can use the ELT system. If papers need to be submitted manually, the wait time will be longer.
Bank rate tip
Visit your state's DMV website to learn more about the process in your state.
How long does it take to get a title after paying off the loan?
Shinn says that in states where you must file paperwork to get a new car title in your name, you can expect to receive your new title anywhere from two to six weeks after filing the paperwork. However, because each state's processing times are different, the process may take longer or shorter.
Nishank Khanna, chief marketing officer at Clarify Capital, says that with DMVs, email titles can automatically take less time, usually about 15 to 30 days. However, processing time may cause delays, so please call, email or visit in person if you think too much time has passed.
Final Retention Considerations
While it is normal to have a lien on your vehicle, there are some important details to consider. E.g. a mortgage can be taken out on your vehicleprevent you from selling it– or at least make the sale significantly more difficult, says Brian DeChesare of Mergers and Inquisitions.
You will have to pay what you owe on the car out of your own pocket. Then you must have ownership transferred to you before transferring it to your buyer. It can be a lengthy process with a lot of paperwork, both for you and the person buying your car.
DeChesare also says the opposite is also true: You can't get title to a car if you buy from someone with a lien until he or she pays off the car. This isbuy a car with a mortgageon the difficult. However, some DMVs have a lien search feature that allows you to find out who has title to the vehicle and contact them directly to speed up the process.
To avoid these challenges, many drivers trade in mortgaged cars to their dealership when they upgrade. When youtrade in your carat a dealer you will be offered a trade-in value for your car that is hopefully higher than you owe. The dealer will arrange for the title to be transferred into his name so he can sell your car to someone else, leaving you completely out of the equation.
In short
You may need to file some paperwork after you finish paying off your car loan. But in some states it can be as simple as waiting for the lender to submit electronic verification.
Either way, you should be proud of itpaid off on your car loan. Think about your future finances before upgrading to another car with a new payment, especially if your car is still in good condition.
