When Financing a Car, Who Has the Title?
Your car title is an important document that names the legal owner of the vehicle, as well as the VIN and lien-holders. If you have a loan, your lender will most likely hold onto the title until you pay it off.
Here’s what you need to know about car titles during auto financing, including how you can obtain a copy of the title if your lender has it.
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Who Has the Vehicle’s Title During Financing?
When your car is financed with a loan, the lender will typically keep the title until the loan is paid off. Only at that point do you become the legal owner of the vehicle. Because your lender technically owns the car until the loan is paid, you usually don’t get the title until the loan has cleared.
In some states, however, the driver is allowed to hold the title while they are paying off the loan. These are called non-title holding states. But even if you live in a non-title holding state, the lien-holder’s name will still appear on the title as the legal owner.
Here are the states that allow you to possess the physical title with a lien:
KentuckyMarylandMichiganMinnesotaMissouriMontanaNew YorkOklahomaWyoming
How to Get a Copy of Your Car Title
The process of obtaining your car title depends on whether you’ve paid off the loan or if you’re still making payments. Here’s a brief look at the process for both situations.
When Your Loan is Paid Off
Once your loan is paid off and you have zero balance, you become the legal owner of the vehicle. At this point, the lien-holder will be removed from the title and your name will be added as the owner.
If you live in a non-title holding state, the lender will send you a notification confirming that the loan has been paid off. You will also receive an official release of lien letter. It’s your responsibility to bring that letter to your DMV or town clerk’s office, along with the current title, and apply for an updated title. Once the application is submitted, you can expect to receive the updated title within one month.
If you live in a title holding state, the notification process is different.
For states that use the Electronic Lien and Title (ELT) system, the lender will notify your state’s DMV directly, which will send you the updated title. There’s no need to visit the DMV in person or submit a new title application. However, it usually takes about a month to get the title in this case. Most lenders will wait a few weeks after your final payment has cleared before they notify the DMV.
If your state doesn’t use the ELT system, you will probably receive the title from your lender with the release of lien form in the mail. Then, you would go to the DMV and apply for an updated title.
When You’re Still Paying the Loan
If you’re still paying off your auto loan, you don’t legally own the vehicle, even if you live in a non-title holding state and have possession of the title.
The only way to obtain your car’s title with your name as the legal owner is to pay off the remaining balance you owe. If you can afford to pay off the rest of your loan in a lump sum, contact your lender and ask for the payoff amount. It will be different than the current balance because it includes additional fees.
If you’re planning to keep your car until the loan is paid off, there’s no need to get the title. But if you want to sell the car before it’s paid off, you will need the title to complete the transaction. You can sell your vehicle and use the profits to pay off the loan, get the title, and transfer it to the new owner.
However, this only works if you have positive equity in the car, meaning you owe less than what the car is worth. If your profits aren’t enough to cover your loan balance, you’ll need to find another way to make up the remaining amount.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.
