So you’ve finally completed paying off the car loan you’ve had for the past few years. There are a couple of other things to do before you can finally say you own it completely! Here’s how to obtain your car’s title after loan payoff.
Unlike the rare few people who can afford to buy a car with cash, average Americans usually take auto loans. And to be honest, it truly doesn’t feel like you own the car until you completely pay off the loan! Getting a ‘free and clear’ vehicle title in your hand is what ultimately makes the wait worthwhile.
Depending on the state you have registered the car in, the title could be either with the lender or with yourself. Either way, once you have paid off the loan, you will need to update it to reflect the new ownership. Here’s everything you need to know about the process.
What is a car title?
A certificate of title or car title is a document that provides proof of ownership of a vehicle. It includes all the vehicle details like the vehicle identification number, license plate number, year, make, model, and more. It also includes the name of the lienholder (if any).
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The lienholder’s name is usually included for most titles if the car was bought via an auto loan. It is the party that has the rights to the car until the loan is paid in full and is usually a bank, credit union, or financial firm. In some states, the lienholder holds the car’s title and is considered the legal owner until the loan is paid off.
That means the lender holds the car’s title and is considered the vehicle’s legal owner until the loan is paid in full. The lien protects the lender and allows them to repossess the car if the borrower stops making payments.
What happens after I pay off my car loan?
When you finally pay off your car loan, the lienholder will endorse the release of the lien to the new owner – you. The next procedures depend a lot on which state you are in and their specific transportation laws.
In some states, they will send the current title and other documents electronically to the DMV, which will then update the title and send it to you without any effort on your part. In other states, the lender may mail the lien release to the DMV, and you will have to collect the updated title from them in person.
How to get your title after paying off your car loan
The process for getting your car title varies slightly depending on the state you have registered the vehicle in. Broadly, we can divide them into two categories: title-holding states and non-title-holding states.
In title-holding states
In such states, the car title will be kept with the lienholder (i.e. the lender) and NOT with the registered owner (borrower). Once the loan is paid off in full, the lienholder can notify you and the concerned DMV in one of two ways:
- Electronic Lien and Title (ELT) system: If your state uses ELT, the lienholder will notify the state DMV electronically once you make the final payment. Usually, they will wait for two weeks after your final payment to do so. The DMV will update the car title accordingly and send it to you over email. If you need a paper copy, you may have to request it specifically.
- Manual notification: In states where ELT has not been adopted so far, the lienholder will send the current title and ‘release of lien’ letter to the DMV via regular mail. You can contact the DMV to get the updated car title that reflects the change in ownership.
In non-title-holding states
Non-title holding states allow you to retain the car title with yourself even if you financed it via an auto loan. The registered owner (i.e. you) gets to hold the car title for the duration of the loan, while the lienholder will receive a separate document verifying their connection to the vehicle.
There are only nine non-title-holding states in the US – Kentucky, Maryland, Michigan, Minnesota, Missouri, Montana, New York, Oklahoma, and Wisconsin.
Where is the Electronic Lien and Title (ELT) system in use?
The ELT system has created by the American Association of Motor Vehicle Administrators (AAMVA) to be adopted across the country. However, only six states have adopted the AAMVA ELT system: Arizona, Hawaii, Ohio, South Carolina, Texas, and Virginia.
How long does it take to get a car title after loan payoff?
Depending upon the state your vehicle is registered in, it will take between two to six weeks to update your car title.
Where can you find your vehicle’s lienholder?
- If you are in a non-title holding state, the vehicle’s lienholder will be listed in the title, which is in your possession.
- You can also find your vehicle’s lienholder by checking with your state DMV by using the vehicle identification number.
- A vehicle history report can also give you information about the lienholders, odometer reading, previous owners, and more.
How can you get a lien release?
A lien release is a document confirming that you have paid off the loan amount due to the lender and that the lienholder is transferring full ownership to you.
- Ensure you have completely paid off the loan balance, including any interest. Ideally, the lender must endorse a ‘release of lien’ document upon clearing the loan.
- The lender must notify the DMV that your loan has been paid off.
- You may need to contact the DMV to ensure they have received the lienholder’s notification.
- The DMV will then update the new title with your ownership details electronically. You also request a paper copy if you need one.
Frequently Asked Questions (FAQ)
How can I get the title to my car?
If your vehicle is registered in a state that uses ELT, the lienholder will notify the state DMV electronically and send them a ‘release of lien’ document. The DMV will update the car title to reflect the change in ownership and send it to you.
If you are in a state that does not use ELT, the same process will be followed through the regular mail system. You may have to contact the DMV to check if the lienholder has sent in the current title and may have to pick up the updated title in person.
Why did my credit score go down when I paid off my car?
Your credit score could drop even if you recently closed a car loan because you may not have any other active installment loans. When you pay off your only active loan, it is called a closed credit account. According to FICO, people with no active loans are more likely to default than those with multiple loans that are regularly repaid.
How long does it take for your credit to go up after paying off a car?
There will be a slight dip in your credit score when you pay off a car loan. But it will usually improve within the next 30-45 days.
How long does it take to get a car title after paying off a loan in California?
You can get your new title between 15-30 days from the date you pay off the loan.
Can I sell my car without a title?
Yes, you can sell cars that are older than 20 years or considered a collectible without a title. But you must have a bill of sale. However, to sell a fairly new car, you will need to show proof of ownership. The best option is to replace a lost car title before selling it to someone else.
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