Paying off your car loan is an exciting moment and knowing that your vehicle is finally all yours can be a major relief. If you are getting close to making that final payment, you might be wondering what you need to do to get your title and make everything official.
Just because you have made your final payment, that doesn’t mean that everything is done and taken care of for you.
Depending on where you live, there may be some more steps that you have to go through to make your car officially yours. Although these steps can vary by state, they all have the same end result.
By understanding what needs to happen for you to finally get your car’s title in your name, you can ensure that your vehicle is in compliance with the law and that every detail is taken care of.
What is a Lien?
When you take out an auto loan with a bank, credit union, dealership, or other institution, they are essentially buying the car for you. You pay them back plus interest with your monthly payments for a fixed amount of time and when you have paid the entirety of that loan, the car is yours. Until that happens, the financial institution is either a full- or part-owner of that vehicle depending on your state.
Having a party other than yourself on your car’s title is called having a lien on the title. When you have a lien on your title, this means that there are certain things you can’t do such as selling the vehicle without working it out with the lender. It also means that if you don’t make a payment, the lienholder has a right to repossess the car since it counts as a security interest. When you make your final car payment, the lien is taken off the title and you can do whatever you want with it because it is fully in your possession.
Why is Your Car’s Title Important?
Your car’s title is important because it contains information pertaining to who is the rightful vehicle owner in the eyes of your state’s Department of Motor Vehicles.
You need to make sure that the DMV is aware of any changes in ownership or mailing address and that these are reflected on your vehicle title. You will also need to have the title to obtain things like license plates, coverage from your insurance company, and more.
Your title will have all the important information about you and your vehicle to help verify your identity and your ownership of the car. The vehicle identification number, or VIN, is on the title as well as the registration date, mileage, and whether there are any liens on the car as well as your contact information.
Keeping this information current is important, which is why you will most likely need to get a new, updated title when you pay off your car loan.
How to Obtain Your Title
Once you have made the final payment on your car, you will need to obtain a new title. This is because the old title will either have your lender as the main owner or yourself and the lender as co-owners. Either way, getting a duplicate title that lists you and only you as the rightful owner is crucial and will be needed if you ever intend to sell the car or need to prove your ownership at any point.
Every state has different regulations when it comes to obtaining a new title for a car. Some may require very little input from you and you will simply receive the new title in the mail. For others, you may need to go to the DMV and apply for the new title there. Knowing the different ways to get the new title can help you be prepared when the time comes.
Transfering the Title
Sometimes, depending on the lender you have used, you may not get a new title when you make your final payment. If you live in a non-title holding state, the lender may only send you the original title and the lien release and it will be up to you to go to the DMV and get the new one for yourself.
When you do this, you will need to bring the original paper title, your driver’s license, license plate number, VIN, make and year, lien release, and registration.
When to Expect Your Title After You Pay Off Your Car Loan:
The amount of time it takes to get your new title will depend on quite a few factors. If your lender waits until the final payment clears and needs some processing time, this can add some extra days onto the time you will have to wait.
For the most part, you can expect to wait around 30 business days for the entire process to be taken care of. If you are planning to do a trade-in or to sell the car, be sure to account for this extra time to get your new title in hand.
What to Do if You Can’t Find Your Vehicle’s Lien Holder:
Sometimes, in the time period between getting your loan and making the final payment, the financial institution may go through some changes. They will sometimes merge with other banks or credit unions or the dealership may change owners. When this happens, you may have to do some research to get your new title or lien release document when you pay off the car.
If you aren’t sure how to get ahold of your lender, check with your state’s DMV. They will often have a financial institution listing section on their website. Many of them offer searches where you can enter your car’s VIN and it will look for your loan and give you contact information for the new institution.
Get a Lien Release
You will need to get a lien release after you have made the final payment that releases you from your financial liability and finalizes the completion of the loan. Depending on what kind of financial institution you have used to get your auto loan, your lien release may take some time. Oftentimes, banks and dealerships will wait for the loan payment to clear and you will need to wait for the final payment and internal paperwork to process.
Once you have received your lien release, you can then go through the process of getting a clear title from your state’s DMV. This process will vary depending on where you live and what kind of system your state has in place for processing titles and vehicle registration information. Depending on the process, you may have to do some extra steps to get the new certificate of title.
Difference Between a Title-Holding State and a Non-Title-Holding State
There are two types of states when it comes to whether or not you will hold onto your title while you have a lien on your car: a title holding state and a non-title holding state. In a title holding state, you will already have a copy of your title and it will be in your name. The only difference is that the title will also have the name of your lender on it as an additional owner. To get this removed, you will need to go to your DMV and get a new title that lists you as the only owner.
In a non-title holding state, the lender will have the title for the duration of the loan. In these states, the lender will need to send a lien release and the original title to the DMV to have them transfer it to you. In these cases, they will either send you the new title in the mail or you can go pick it up. This may take several business days and your lender should inform you when the process is underway.
Electronic Lien and Title System (ELT)
In some states, there is something called the Electronic Lien and Title system, or ELT. This system is interconnected with lenders and dealerships all over the state and helps the DMV keep track of owners and lenders for each individual car. If you live in a state that uses the ELT system, the process of getting your new title will be much easier.
In states that use the ELT, the lender will simply inform the system that the final payment has been made and that the DMV needs to issue a new title with you as the sole owner. With this system, you don’t need to get a lien release as it will all be taken care of electronically. Then, you can pick up your new title or have it mailed to you.
Where is the ELT in Use?
Currently, the ELT system is in use in many different states throughout the U.S. and it is getting more and more common as time goes on. The states that currently use the system include:
- New York
- North Carolina
- South Carolina
- South Dakota
Paying off a car loan is a big step and can be very beneficial for both your mental health and your financial situation. Staying on top of your vehicle’s registration and title will allow you to sell your car when the time comes and will help protect you in the event of an accident or a theft. By having everything in your name, you can be sure that you will be covered in the eyes of the DMV and that your car is legally permitted to be on the road.