Do I Get a Title If My Car Is Financed?

When purchasing a vehicle, many individuals opt for financing. This often raises questions about vehicle ownership and the car’s title. Understanding how a car title functions with a loan is important for vehicle owners.

What a Vehicle Title Is

A vehicle title is a legal document that establishes legal ownership. It is issued by the state where the vehicle was purchased. This document contains identifying information such as the Vehicle Identification Number (VIN), the make, model, year, and the owner’s name and address.

The state’s Department of Motor Vehicles (DMV), or a similar agency, issues and maintains these titles. It is necessary for buying or selling a vehicle, ensuring proper ownership transfer. The title also lists any outstanding financial claims against the vehicle, providing a record of its legal status.

Who Holds Your Title When You Have a Loan

When a car is financed, the lender holds the title or is listed as the lienholder. You are the registered owner and use the vehicle, but the lender maintains a legal claim. This claim, called a “lien,” is the lender’s security interest in the vehicle as collateral for the loan.

This protects the lender’s investment until the loan is repaid. If payments are not made, the lien allows the lender to repossess the vehicle to recover the debt. This security interest is documented in the financing agreement and recorded with the state’s motor vehicle agency.

Getting Your Title After Loan Repayment

Once a car loan has been fully paid off, the process begins for the owner to receive the clear title. The lender, also known as the lienholder, is responsible for releasing their lien on the vehicle. This release signifies that the lender no longer has a financial claim to the vehicle.

The timeframe for receiving the title after payoff can vary, typically ranging from two to six weeks. Some states automatically send an updated title to the owner once the lien is released electronically by the lender. In other states, the lender might send a lien release document directly to the owner, who then needs to submit it to the DMV to obtain a new title free of the lien. If the title is not received within the expected timeframe, contact the lender first, and then the state’s motor vehicle department, to inquire about the status.

Your Responsibilities Once You Have the Title

Once you have received the clear title for your vehicle, it is important to keep it in a secure location, such as a fireproof safe, and not inside the vehicle itself. Having the title in your name, free of any liens, signifies full ownership and provides several capabilities.

A clear title enables you to sell the vehicle, use it as collateral for a different loan, or simply retain it as proof of complete ownership. When selling the vehicle, the title must be transferred to the new owner, which typically involves signing over the title and notifying the state’s motor vehicle agency. If the title is ever lost, stolen, or damaged, it is necessary to apply for a duplicate title through the state’s motor vehicle department, a process that usually requires a completed application and a fee.