If you don’t have your name on the title or a lien is showing, you may not be able to sell your car or use it for a title loan. Why is there a lien? How can you remove it? Learn more about this common obstacle and how to get it resolved.
What is a title lien?
When you borrow money to buy a car, the lender will use the car as collateral to ensure that you pay the loan back. If you miss payments or default on the loan, this entitles the lender to take the car to help cover their losses. This arrangement is displayed on a car title as a lien. If the lien section of the title has a lender showing, this is considered a title lien that shows you do not own the car free and clear.
There are other types of liens as well, including storage liens or mechanic’s liens. If your car is impounded, for example, the owner of the impound lot may place a lien against your car until all fees are paid.
Many states have a special section on their title that shows the lien holder’s information and indicates that the lender is the rightful legal owner of the car while you continue to make payments. However, you can still appear as the registered owner for the purpose of licensing your car and buying insurance.
How to remove a lien on a car title
There are benefits to owning a car in full, without a lien on it. It may be cheaper to insure the car, or you could use the title to borrow money with a title loan. Whatever your reason for wanting the lien removed from a car title, the only way to make this happen is to pay off the car loan, storage fees, or mechanic’s fees in full. Keep making payments until you have finished your obligation to the lienholder.
Adding your name back to a title
If you have paid off the lien in full, you may be wondering how to add a name to a car title. For many lenders, this process is initiated the moment you make your final payment. They will usually send you a confirmation of the final payment in the mail with further instructions on how to remove them from the title. If you think your loan is paid off and you haven’t received word from the lender, contact them to see what needs to be done.
Depending on your state, there may be a form to fill out to have the lienholder removed. You can then take the form—along with the documentation from the lender and original title—to the DMV or BMV to update the title. There is a fee for doing this. Also, some lenders use an electronic system to update this information and may work with your state DMV to let you request the new title online.
When you receive your new title, you’ll see that the lienholder section is blank. This means you have a lien-free title and can use it to secure loans or even get discounted rates on your car insurance.
How to add a name to a car title
If there is no lien on your title and you are shown as the sole legal and registered owner, you can add anyone to the title. Your state BMV or DMV will have specific instructions, but they usually have a title request form for you to fill out along with the information for the person you want to add.
There is a fee for making the changes, but you should receive your new title the same day. This process only works if you want to add someone and not replace your name with another person’s name. That is considered a transfer or a sale and is a bit more involved than just adding another owner.
Final lien removal tips
Since the first step to removing a lien is to confirm the loan is paid in full, check your account balance and contact your lender if you see any discrepancies. Even a few dollars can keep the title from becoming yours, and the payoff amount doesn’t always match what your last statement showed as the remaining balance. Once it’s down to zero, the lender should work with you to get the title placed solely in your name.