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When you take out an auto loan, your lender will be listed as a lienholder on the title. This gives your lender legal rights to your car — especially if you default on the loan.
Once you’ve made your final payment, you must get the title from your lender to prove you legally own the car. In some states, getting your title is an automatic process after you pay off your loan. In others, you may have to submit paperwork to the Department of Motor Vehicles. Either way, expect to wait a few weeks for your title to be put in your name.
What a car title lien is
An auto lien is a note showing that your vehicle is legally owned by another party — in many cases, your lender. A lien on your car is similar to a property lien on your home. With a lien in place, the lender has rights to the vehicle until you pay off your loan.
The title will be released to you after your loan is paid in full. At this point, the legal ownership of the car transfers from your lender to you.
How do I get my title after paying off my car?
Once you pay off your auto loan, the lien holder must notify your state’s Department of Motor Vehicles. The process depends on whether you live in a title-holding or non-title-holding state. Some states take care of it automatically, while others require you to do some grunt work.
“After you’ve paid off your auto loan, you’ll have a ‘free and clear’ vehicle title, meaning you now fully own your car,” says Julie Shinn, vice president of lender management at RateGenius. “Any time there are ownership changes, you have 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 every state uses it. If your state doesn’t, you or your lienholder may need to submit paperwork either by mail or in person.
Whichever your state uses, you will need to let your state know that you no longer carry a balance on your loan and are the sole owner of the vehicle.
In a title-holding state
If you live in a title-holding state, you will be the one responsible for your car title. It should list both you and the lienholder. When 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 get your title. It should take no more than 30 days, so get in touch with your lender if it moves too slowly.
The lien release includes formal documentation that the loan is paid in full. Once you have it, your state may require you to submit physical paperwork — either 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 lienholder, to possess the car title. These include:
- New York
In a non-title-holding state
For most Americans, your lender will possess the title for the duration of the loan. When your loan is paid off, your lender will send the lien release to the DMV. The DMV or other state office will then send the updated title to you.
This process can take longer than in a title-holding state. However, you may not have to submit much, if any, paperwork. Once the DMV is notified, it will automatically mail you the title to your car with nothing required on your part.
You will still need to keep up with your lender through the process to ensure it is done in a timely manner. Generally, expect receiving your title to take around two to six weeks.
As with title-holding states, it will be quicker if your lender is able to use the ELT system. If paperwork has to be submitted manually, the wait time will be longer.
How long it takes to get a title after loan payoff
Shinn says that in states where you have to 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 submitting the paperwork. But since every state’s processing times differ, the process may be longer or shorter.
Nishank Khanna, the chief marketing officer at Clarify Capital, says that states with DMVs that mail titles automatically may take less time, usually around 15 to 30 days. However, processing time can drag things out, so be sure to follow up with a call, email or in-person visit if you feel like it’s been too long.
Final considerations about liens
While it is normal to have a lien on your vehicle, there are some key details to remember. For example, a lien on your vehicle may prevent you from selling it — or at least make the sale significantly harder, says Brian DeChesare of Mergers and Inquisitions.
You’ll have to pay what you owe on the car out of pocket. Then you will need to get the title transferred to you before transferring it to your buyer. It can be a lengthy process with a lot of paperwork for both you and the person buying your car.
DeChesare also says that the opposite is also true: You cannot receive the title for a car when you’re buying from someone with a lien until they pay off the car. This makes buying a car with a lien on it tricky. However, some DMVs have a lien search feature where you can find out who has the title for the vehicle and contact them directly to speed up the process.
To avoid these challenges, many drivers trade in cars with a lien to their dealership when they upgrade. When you trade in your car at a dealership, you’ll be offered a trade-in value for your car that is hopefully more than you owe. The dealership will take care of transferring the title to its name so it can sell your car to someone else, taking you entirely out of the equation.
The bottom line
You may need to file some paperwork when you finish paying off your car loan. But in some states, it may be as easy as waiting for the lender to submit electronic verification.
Either way, you should be proud that you paid off your auto loan. Consider your future finances before upgrading to a different car with a new payment, especially if your car is still in good condition.