A lien is placed on a car’s title when the car is used as collateral in a loan.
When vehicles are purchased through financing, rather than outright with cash, the lender typically puts a lien on the vehicles title. This prevents the vehicle from being sold again until it is the loan is paid off and enables lenders to repossess vehicles that aren’t paid for. When a vehicle loan is paid off in full the lien can be removed by the Department of Motor Vehicles. A document from the lender, verifying that the loan has been satisfied will be required to get the lien removed.
1. Satisfy the terms of the vehicle’s loan. This usually only involves paying the balance of the loan back to the lender, including any interest that has occurred. Some loans can be paid before schedule, though a penalty may be charged for early or late payments.
2. Submit an application to the lender for proof of that the loan has been satisfied. The lender will mail documents to the designated state Department of Motor Vehicles (DMV) stating that the loan has been paid in full. These requests can be made through your local DMV or directly to the lender by mail, fax or by calling the lender’s loan department. Some lenders automatically mail these notifications when loans are closed.
3. Visit the DMV and verify that they received the loan satisfaction documents and request that any liens are removed from the vehicle’s title. Each state may have slightly different forms for this process but all will generally include questions about the owners address and identification. The lenders contact information will also be required for the lien removal form. A new title will be given to the owner with the lien released, allowing the owner to transfer ownership of the vehicle.