When you pay off your car loan, you're entitled to receive a clear title for your motor vehicle. The title process varies from state to state, but the result is that the Department of Motor Vehicles (DMV) issues a new certificate of title.
Knowing how to remove liens and how to get a title after paying off car loans allows you to establish legal ownership of your motor vehicle. This article will cover some of the FAQs of what to do after your car has been paid off, so you can obtain your title.
This is a general guide and an important disclaimer is that these rules will vary by state, so be sure to check the rules with your state gov.
What is a Lien?
A lien is a method of protecting the right of a property owner, seller, or lending institution to take legal action if a buyer or borrower doesn't make payments on a purchase or loan. If you buy a new car or a used car from a dealership, or an individual, and take out an auto loan, your seller or lender places a lien on your car title and becomes a lienholder.
Auto loans are based on individual credit scores when going through a lending institution. If you trade in a vehicle that money is used as a down payment, and is not collateral against the lien. Vehicle titles contain the names and addresses of lienholders, which can be private individuals or financial institutions, including credit unions.
Your lienholder has a security interest in your car, which means they have the right to repossess the motor vehicle if you stop making your auto loan payments. Once you make the final payment on your auto loan, you have a right to obtain a lien release from the lienholder. When you get a lien released, the release allows you to obtain a clear title from the DMV.
Once your car loan is paid in full, notify your insurance company of the change of ownership. Not only does your insurance company need to be informed of the change of title, but becoming the sole owner of the vehicle could save you money on your automotive insurance.
Ways of Obtaining a Lien Release
States use different processes for obtaining lien releases, so check with your lending institution and DMV for your state's requirements. Nevada, California, Pennsylvania, New York, and Ohio are some of the states in which lien release procedures depend on whether a lender uses the Electronic Lien and Title (ELT) system or a traditional paper title.
Lenders that participate in the ELT program have electronic titles and records. With many ELTs, a lien release triggers an automatic process for you to get a title after paying off the car loan. In Nevada, lenders using ELT notify the DMV when you have made your last payment on your auto loan; so make sure your lender has your current address. Nevada's DMV prints and mails you a new paper title without a fee. You don't have to do anything except wait for about eight weeks to receive your new title.
California has a similar ELT process. Before making the last payment on your car loan, check the accuracy of your registration, mailing address, and your lender's information. After you make your final auto loan payment, the lender sends an electronic release to California's DMV. Once the DMV receives the electronic release, it issues a new certificate of title and registration card showing you as the sole owner.
ELT programs help states update vehicle information faster and maintain lien records more efficiently. States save on mailing and printing costs as well. Under Pennsylvania's ELT Program, the state only prints paper titles when a lienholder releases a lien or when someone needs a paper title to assign or transfer vehicle ownership.
How to Get Title After Paying Off Car Loan in Ohio
In Ohio, if you want to sell your car and there's an ELT, first pay off the remaining amount of the car loan. The lienholder releases the lien electronically and you pick up the title from the Ohio Bureau of Motor Vehicles (BMV) the next business day.
Paper Title Lien Releases in California
A lienholder using a paper title in California must sign on line 2 of the certificate of title for the lien release. Once you get the signed certificate of title, check your address. If you changed your address and didn't update it with the DMV, draw a line through your old address on the title. Write your new address next to it clearly and legibly. Send the signed certificate of title and a transfer fee to the DMV. The DMV removes the lienholder's name and issues a new certificate of title and registration card showing you as the sole owner.
Lien Releases for Paper Titles in New York
Once you make your last payment and want a lien released on a New York car title, contact your lienholder and obtain a notice for the New York State DMV. The notice shows you don't owe anything on your car loan. Lienholders with paper titles have two options for giving you this notice. One is that the lienholder or lender gives you Form MV-901, a Notice of Recorded Lien.
A lienholder's second option is sending an official lienholder letter to the New York State DMV telling the agency you made your final car payment. New York's DMV requires that the lienholder write the letter on the lienholder's official letterhead. The letter must contain all the information about the vehicle, and a certifying official of the lienholder company or lending institution must sign it. If the official signing the letter isn't a loan officer, a notary must witness and notarize the signature.
How to Get Title After Paying Off Car Loans
As with lien releases, follow your state's Department of Motor Vehicles procedure to acquire a title after paying off a car loan. Procedures might differ depending on whether there's an electronic lien or a traditional lien on a paper certificate of title. As you near the end of your loan term, be sure your address and contact information is correct and up to date with both the lending company or bank and your DMV. Expect to pay a title fee and wait several business days before the DMV sends you a new title. Fees charged will differ by individual state. In some states, the lienholder notifies the DMV, and they mail a new title to you, without you having to do anything.
Clearing Paper Title Liens and Getting Title in Nevada
In Nevada, lenders with paper titles don't tell the DMV if you pay off your auto loans. When you pay off a motor vehicle car loan in Nevada and there's a paper title, your lienholder must sign the vehicle title in the right place and send or give it to you. Take it to a Full-Service DMV Office or mail it to the DMV. If the vehicle is registered in Nevada, the agency removes the lienholder and sends you a clear title.
Nevada's DMV continues to list the lienholder in the official records unless you obtain a new title. If another state-issued your title, you need a duplicate title from that state. If you misplaced your title, ask the lienholder for a lien release.
Getting Title in New York
New York's ELT program differs from other states. In New York, the vehicle owner holds the title and the lienholder gets an electronic lien notification. To get your title in New York, you need the lien release document and your original title certificate. Make out a check or money order for the fee, payable to the Commissioner of Motor Vehicles. Mail the three items to Lien Release at the Title Services office of the DMV in Albany, New York. The agency sends you the new title within 90 days of receiving your paperwork.
What to Do If You Can't Find the Lienholder
If your financial institution or lender merged with another lending institution, changed its name, moved, or went out of business, you might have trouble finding the lienholder. Locating and communicating with the lienholder is pivotal for the transfer of title. For help in finding an institutional lender to get a lien release in California, check the Financial Institution Listing section on the state's DMV website.
In New York, check for a lienholder's name and address online at the DMV website. Look for the "Registration/Check a Title or Lien Status" page. You need the Vehicle Identification Number (VIN), and the vehicle make, model, and year.
Making the final payment on your auto loan is a milestone. Knowing how to get a title after paying off a car loan enables you to complete the process of buying a motor vehicle. You can now drive with confidence knowing that your new car is all yours. Keep this process in mind if you ended up desiring to sell your vehicle once it is paid off. The same process is valid and followed by the transfer of title from your name to the new buyer's name.