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Once you’ve made the final payment on an auto loan, you’ll need to get the title from your lender in order to prove that you legally own the car. This title is also a critical document if you end up selling your car down the line. However, the process of obtaining a car title varies by state.
What is a car title lien?
An auto lien is a note showing that your vehicle is legally owned by another party, in many cases your auto loan lender. In a lot of ways, a lien on your car is similar to a property lien on your home. With a lien in place, the lender has rights to the home (or your car) until you satisfy your loan in its entirety by paying off every dollar you borrowed, plus taxes and fees.
Once your loan is fully paid, the lien on your car title is lifted, and the title can be released to you. At this point, the legal ownership of the car transfers to you from your lender.
Once you pay off your auto loan , the lien holder who serviced your loan is required to notify your state’s Department of Monitor Vehicles, or DMV. They can do so electronically or by submitting specific state-required paperwork, but either way, they will let your auto loan servicer know that you no longer carry a balance on your loan.
“After you’ve paid off your auto loan, you’ll have a ‘free and clear’ vehicle title, meaning you now fully own your car,” says Julie Shinn, vice president of lender management at RateGenius. “Anytime there are ownership changes, you have to update the title.”
Does the process differ by state?
The process involved in getting the title to your paid-off car varies dramatically by state, with some states taking care of it entirely and others requiring you to do some grunt work.
According to Shinn, in states that require you to do some filing to get your title, your financial institution will send you a lien release and formal documentation that the loan is paid in full. From there, you’ll take those documents to your state DMV to get an updated title solely in your name.
In other states, once the motor vehicles department is notified, they will automatically mail you the title to your car with nothing required on your part.