Once you’ve made the final payment on an auto loan, you will need to get the title from your lender to prove you legally own the car. This title is also a critical document if you end up selling your car down the line.
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. In a lot of ways, 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 what you borrowed, plus interest and fees.
Once your loan is fully paid, the lien on your car title is lifted, and the title can be released to you. At this point, the legal ownership of the car transfers from your lender to you.
How to get your title after paying off your car loan
Once you pay off your auto loan, the lien holder is required to notify your state’s Department of Monitor Vehicles (DMV). They can do so electronically or by submitting specific state-required paperwork. Either way, they will let your state know that you no longer carry a balance on your loan and are the sole owner of the vehicle.
“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. “Anytime there are ownership changes, you have to update the title.”
The title change process varies by state
The process involved in getting the title to your paid-off car depends on your state laws. Some states take care of it entirely and others require you to do some grunt work.
According to Shinn, your lender will send you a lien release in states that require you to file to get your title. This includes formal documentation that the loan is paid in full. From there, you’ll take those documents to your state DMV to get an updated title solely in your name.
In other states, once the DMV is notified, they will automatically mail you the title to your car with nothing required on your part.
To learn the process in your state, visit your state’s DMV website.
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 are different, the process may be longer or shorter.
Nishank Khanna, a CFO at Clarify Capital, says that states with DMVs that mail out auto titles automatically may take less time, usually around 15 to 30 days. However, processing and mail 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.
This is based on the fact that you will have to pay off the car loan and gain access to the title before you can sell your car and transfer the title to someone else. You may not have the funds to pay off your car before the sale, and if you happen to owe more than your car is actually worth, you’ll have to pay the difference.
DeChesare also says that the opposite is true as well: 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 a tricky ordeal. However, some DMVs have a lien search feature where you can find out who has the title for the vehicle and contact them directly.
As a result of these challenges, many drivers just 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
If you’re looking to get your car title after paying off your auto loan, you may need to do nothing more than sit back and wait. But, in some states, a trip to the DMV may be in your future.
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.