How to get title to your car after the loan is paid off
Pay a automatic loan is a major achievement, and it can lead to quite a significant improvement in your finances. After all, you will potentially save hundreds of dollars per month and thousands per year.
Once you’ve made that final payment, you might be wondering what happens next. After you pay for your car, how do you get the title? The short answer is that it varies by state.
How to get your title after you’ve paid off your car loan
After you’ve paid off your auto loan, the lien holder who handled your loan is required to notify your state’s vehicle monitoring department, or DMV. They can do this electronically or by submitting specific documents required by the state, but in any case, they will notify your car loan manager that you no longer have a balance on your loan.
“Once you’ve paid off your car loan, you’ll have a ‘free and clear’ vehicle title, which means you now own your entire car,” says Julie Shinn, vice president of asset management. lenders at RateGenius. “Whenever there is a change in ownership, you must update the title.”
Does the process differ from state to state?
The process of getting title to your reimbursed car varies widely from state to state, with some states doing it all and others requiring you to do some background work.
According to Shinn, in states that require you to make a deposit to get your title, your financial institution will send you a lien waiver and official documents showing that the loan is paid in full. From there, you’ll take these documents to your state DMV to get an updated title just in your name.
In other states, once the Department of Motor Vehicles is notified, they will automatically mail your car title to you with no obligation on your part.
To find out about the process in your state, visit your state’s motor vehicle website. A complete list of sites by state is available at DMV List.
How long will it take to get my title after the loan is paid off?
Shinn says that in states where you need to complete paperwork to get a new car title in your name, you can expect to receive your new title two to six weeks after submitting the paperwork.
“However, each state’s processing times are different, and recent DMV closures due to the COVID-19 pandemic have caused delays,” she said.
Nishank Khanna, CFO of Clarify Capital, says that with DMVs, auto-delivery of auto titles can take less time, typically 15 to 30 days. However, processing and courier time can drag things out, so be sure to follow up with a call if you think it’s been too long and you should already have your car’s title.
What you should know about privileges
A car lien is a note that gives a lender the right to repossess your car if you don’t pay off your car loan. In many ways, a lien on your car is similar to a lien on your home. With a lien in place, the lender has rights to the house (or your car) until you get your loan in full by paying off every dollar you borrow, plus taxes and fees.
But there are some nuances that affect auto loans that don’t apply to home loans.
For example, a lien on your vehicle can prevent you from selling it, or at least make it much more difficult to sell, says Brian DeChesare of Mergers and Inquisitions.
This is based on the fact that you will need to pay off the car loan and gain title before you can sell your car and transfer the title to someone else. You may not have the funds to pay for your car before the sale, and if you owe more than your car is actually worth, you will have to eat the difference.
DeChesare also says the opposite is also true: you can’t receive title to a car when you buy someone with a lien until they pay off the car. That makes buy a car from someone with an automobile lien a delicate test. However, some DMV websites have a lien search feature where you can find out who owns the title of the vehicle.
Due to these differences, many consumers only trade in cars with a lien on their dealership when they upgrade. When you trade in your car at a dealership, you will be offered trade-in value for your car that is hopefully more than you owe. The dealership will take care of transferring the title to their name so they can sell your car to someone else, taking you out of the equation completely.
The bottom line
If you’re looking to get your car title after you’ve paid off your car loan, you might have nothing else to do but sit back and wait. However, in some states, a trip to the DMV may be in your future.
Either way, you should be proud of having paid off your auto loan and owning your car free of charge. You might be tempted to run out and switch to a new vehicle, but it might be a good idea to think about it and let your savings pile up for a few months first. You may find that not having a payment for your car can help you save more for retirement or other goals and that driving an older, paid off car is worth it.