A lien release letter for a car is a document that officially declares that the lien on your vehicle title has been removed and you will be free to take action with your vehicle. This document removes any restrictions on what you can do with your car. A person is typically eligible for a vehicle lien release when the loan on the vehicle has been paid back to the lender.
Your lender, who has loaned you money to purchase a vehicle, places a lien on your title until the loan is paid off in its entirety. A lien is a claim on the property for the security of payment. When a lender loans a borrower (you) money to purchase a vehicle, they want to make sure that they are paid back plus interest. Your lender, also known as your lienholder, will remain printed on the front of your vehicle title until the loan is paid off. A lien on a vehicle title is a cloud on the title that places a hold on ownership; once it’s paid off, you can get a title for your car or you can sell it or trade it in.
Vehicle lien release process
The process of filing for a vehicle lien release will vary depending on your state, your situation, and your lender. However, the lien release process typically consists of the following four steps:
Step 1: Identify your lienholder
Step 2: Compile your lien release letter and non-interest letter
Step 3: Mail your lien release letter and letter of non-interest through certified mail
Step 4: Obtain the signed lien release letter and apply for a clear title
Applying for a clear title
When your lienholder has released the lien on your vehicle, you can take the lien release letter and the letter of non-interest to your state DMV for processing. Before you can receive a clear title for your vehicle, however, you will need to pay all registration and tax fees as well as any title transfer fees.
Typically, your lienholder is required to release your title once the loan has been paid. Unfortunately, that doesn’t always happen. Just because your loan is paid doesn’t mean that the lien has been released; you may still have to go through the vehicle lien release process and notify the DMV of the satisfied loan.
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