How to obtain your car title after loan payoff

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Paying off an auto loan is a major accomplishment, and it’s one that can lead to some pretty significant improvement to your finances. After all, you’ll be saving potentially hundreds of dollars per month and thousands per year.

Once you’ve made that final payment, you may be wondering what happens next. After you pay off your car, how do you get the title? The short answer is that it varies by state.

How to get your title after paying off your car loan

Once you pay off your auto loan, the lien holder who serviced your loan is required to notify your state’s Department of Monitor Vehicles, or DMV. They can do so electronically or by submitting specific state-required paperwork, but either way, they will let your auto loan servicer know you that no longer carry a balance on your loan.

“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.”

Does the process differ by state?

The process involved in getting the title to your paid-off car varies dramatically by state, with some states taking care of it entirely and others requiring you to do some grunt work.

According to Shinn, in states that require you to do some filing to get your title, your financial institution will send you a lien release and 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 motor vehicles department 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 motor vehicles website. A complete list of sites by state can be found at DMV List.

How long will it take to get my 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.

“However, every state’s processing times are different, and recent DMV closures due to the COVID-19 pandemic have resulted in delays,” she says.

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 with a call if you feel like it’s been too long and you should have had your car title by now.

What you need to know about liens

An auto lien is a note that gives a lender the right to repossess your car if you don’t repay your auto loan. 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 home (or your car) until you satisfy your loan in its entirety by paying off every dollar you borrowed, plus taxes and fees.

But there are some nuances that affect auto loans that don’t apply to home loans.

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 eat 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 from someone with an auto lien a tricky ordeal. However, some DMV websites have a lien search feature where you can find out who has the title for the vehicle.

As a result of these differences, many consumers 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 their name so they 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. However, 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 and you own your car free and clear. You may be tempted to run out and upgrade to a new vehicle, but it might be smart to think about it and let your savings accrue for a few months first. You may find that not having a car payment can help you save more for retirement or other goals and that driving an older, paid off car is well worth it.

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