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What Does a Lien on a Car Title Mean?

  • 2 min read

A lien on a car title is very common, especially if you financed your vehicle. What does it mean to have a lien on your car title and how do you remove it?

What is a lien on a car title?

A lien means that someone has a claim on your vehicle. In the case of a car title lien, this person or business is more than likely your lender. When you get an auto loan, your lender (aka your lienholder) will place a lien on your title to signify that the loan has not yet been paid back.

The loan is the money you borrow to pay for the car, the lien is the legal process the lender takes to hold your car’s title as collateral. If you fail to make payments, your lender can repossess your car.

How do you remove a lien from a car title?

First, you should make sure that the loan has been paid off or otherwise satisfied. It’s illegal to remove or attempt to fraudulently remove a lien if the terms of the loan agreement have not been satisfied.

Once you verify that the loan is satisfied, send a lien release request letter to your lender. To release the lien, your lender must provide a lien release letter on their letterhead or a comparable letter of non-interest. Liens can only be released from DMV records when approval is given by the lender.

Should you remove a lien once the loan is paid off?

Yes! Once your loan is paid off, you will have a clean title in your name. With a clean title, you’re free to sell it, trade it in, etc. If you keep the lienholder’s name on the title, even if the loan is satisfied, the lien will often not be released automatically.

When your loan is paid off, your lienholder should stamp your title as paid and send it off to you to transfer to a clean title. However, most lenders don’t have a lien release department. It’s important to keep up to date on your loan payoff to ensure you submit your request for lien release as soon as your loan is paid off.