Have you ever wondered what happens if you stop making payments on your car? Can you still obtain a title? In this article, we’ll explain the process of getting a lien release for your vehicle after defaulting on your loan.
Default & Charge-Off
When you cease making payments on your vehicle, you enter a state of default. The lender will undoubtedly hound you for payment for several months, bombarding you with calls, messages, and even unpleasant letters. However, there comes a point when the relentless pursuit slows down and eventually stops.
After some time, you may begin receiving calls from collection agencies or other companies representing the lender. This phase may last for a few more months before ultimately ceasing. Consequently, your credit report will display what is known as a charge-off or write-off, which prompts a critical question: What does this mean?
In simple terms, a charge-off signifies that the lender can no longer consider your loan as an asset on their books. This adjustment reflects an accounting activity where the loan loses its value for the lender. Prior to default, your car loan was deemed an asset, just like money in the bank. However, once it becomes non-performing, it no longer holds any value for the lender.
The Importance of Lien Releases
It is crucial to note that a charge-off or write-off does not automatically remove the lien from your vehicle’s title. Despite the lender’s altered perception of the loan’s value, the Department of Motor Vehicles (DMV) will not remove it from the title record. This is where obtaining a lien release becomes essential.
Surprisingly, lenders often prefer not to reclaim the vehicle. Even if you have reached out to them, imploring them to take back the car, they might decline the offer. Lenders generally aim to avoid the complexities of repossessing a vehicle. The process entails transportation, repairs, cleaning, reconditioning, auctioning, and title transfer. Considering the expenses and hassle involved, unless it is a relatively new or valuable vehicle, lenders usually opt out of reclaiming it.
Obtaining a Lien Release
Fortunately, there is a way for you to acquire a lien release and clear your vehicle’s title. It requires a strategic approach when communicating with the lender. Instead of simply requesting a lien release over the phone or via email, it is advisable to follow these steps:
Gather the Official Lien Release Document
Print out the official government DMV form for the lien release. Fill in all the required details, including the vehicle’s VIN number, year, make, and model.
Prepare the Document for Submission
Indicate where the lender needs to sign the form by placing a small arrow sticker. Then, mail the completed document to the lien holder. Remember, lien holders do not have dedicated departments for lien releases, so their administrative division will process your submission.
Simplify the Process for the Lender
Make the process as easy as possible for the person handling your request. Include a return envelope with your address and a stamp affixed. By streamlining the process, you increase the chances of prompt and favorable action. Avoid giving them any reason to hesitate or complicate matters.
Send Multiple Copies
To maximize your chances of success, send copies of the lien release document to multiple addresses associated with the lien holder. Research different locations, including main branches and local branches. Consider mailing the document to four or five addresses. Remember, you only need one successful response to clear your lien.
Celebrate the Lien Release
With patience and persistence, you are likely to receive a lien release document from the lender. Once in your possession, rejoice! It indicates that the lien on your vehicle has been cleared. Simply take the document to the Department of Motor Vehicles, and you can sell your vehicle without any title-related complications.
By following these steps and employing a well-thought-out strategy, you can obtain a lien release and clear your vehicle’s title. Although lenders do not have an obligation to provide a lien release after a charge-off or write-off, a proactive and organized approach significantly increases your chances of success. So, if you find yourself in a situation where you haven’t made loan payments for a while, remember that a lien release could be the key to selling your vehicle and freeing up your driveway.