What is a Lienholder on a Car Title?

What is a Lienholder?

A lienholder can be any of the following: a bank, credit union, legal entity, online lender, or financial institution holding a lien against a property or an asset until the loan is fully repaid. Sometimes, a lienholder can be a private party.

If your car is being financed, having a lien on your car’s title means the lienholder legally holds a claim to your vehicle until the loan is paid off. When your car’s title has a lien, you need to prioritize staying out of loan default. Defaulting on your car loan or a title loan means the lienholder has the legal right to repossess your car because you did not stay on top of your payment obligations.

In the case of an auto loan or a title loan, you are free to drive your car while paying off your loan. As long as your loan remains in good standing, you will be able to maintain access to your car! The lien against your car’s title will be lifted once you have made your last payment on your loan.

How Do I Add or Remove Liens from a Car Title?

Adding or removing a lien to or from a car title is fairly straightforward. If you are financing a new or used car through a dealership, this typically involves a lender or the applicable party adding the lien on your car’s title after you get final approval and sign your loan agreement.

If you are not working with a dealer or finance company, you might have to appear personally at your local Department of Motor Vehicles or state equivalent and complete a title application. For example, if you want to add a lien to your car’s title and you live in Texas, you will need to have your vehicle title’s title on hand and complete the Application for Texas Title and/or Registration (Form 130-U).

In this situation, you will be asked to complete the appropriate form by providing your personal information, as well as information about your vehicle and the lienholder. Once you have submitted your application, you will need to pay the required fee, which varies from one state to another. Once the clerk has verified your application, you will be issued a new title that may be mailed directly to your lienholder.

The process of adding a lien to your car’s title will be a little bit different when you get an auto title loan. If you apply for an online title loan and you qualify for funding, you will have to review the terms and conditions of your loan. After looking through your contract, you can accept the loan offer and add your signature. You will need to mail the title of your vehicle to your lender, along with any additional forms required in your state. After disbursing the loan, the title lender will place a lien on your car’s title.

Generally speaking, when you make your final payment on your car loan or your auto loan, the lienholder will release their lien within state-mandated timeframes. In many states, the title lender will electronically release the lien by informing your state DMV or equivalent that the lien should be released. In some states, however, the lender will send you a lien release document, which you will use to give to the applicable government agency for removal of the lien on the title.

How Do Lienholders Affect Car Insurance?

Insurance requirements for cars with lienholders are typically more extensive than those without. Lienholders may require borrowers to have more insurance coverage, including both liability and comprehensive coverage, which may be more than the minimum required coverage in your state. When lienholders require this level of insurance coverage, they ensure their investment is protected from accidents or unforeseen events that could damage the vehicle.

Be aware that having a lienholder on your car’s title can also affect your insurance premiums. Car insurance premiums are typically higher for vehicles with lienholders because more coverage is required. Additionally, lienholders may have specific insurance conditions, like a maximum deductible, that can impact your overall premium. It’s worth noting that the effect on your premium can depend on several factors, including your driving history, state, and the type of vehicle you drive.

What are the Risks of Having a Lien on Your Vehicle’s Title?

There are a few potential risks associated with having a vehicle title with a lien on it, such as:

• Not Being Able to Sell the Car Until the Loan is Paid Off
• Vehicle Repossession if You Default on Your Loan
• May be Required to Have More Car Insurance Coverage at the Request of the Lienholder

To sell a vehicle with a lien, you’ll have to pay the outstanding balance of the loan before you can then transfer the title to the buyer. Sometimes, you can make arrangements for the buyer to pay you upfront so you can pay the balance of the loan yourself and then have the lienholder release the lien. The thing is, it’s tough to sell a car with a lien on it, but you may still find a buyer to work with you.

During the repayment process for a car loan or an auto title loan, it’s important to stay on top of your payments and ensure your insurance coverage meets the lienholder’s requirements! As long as you keep up with your payments and prioritize paying off your loan, you won’t have to worry about your car being seized.

Dial 855-422-7402 if you have any relevant questions about vehicle-secured loans, such as ” What happens if my car is stolen with a title loan?”

How Does a Lienholder Work for Vehicle Title Loans?

If you are approved for a car title loan and sign your loan agreement, a lien is placed on your title by the title lender after the loan is funded. Similar to when you finance an automobile, this lien means that the lender has a legal right to the qualifying car or truck. Once you have completely paid off your loan, the lien will be removed from your title. But what happens if you default on your loan? As mentioned above, that would mean the lender is legally allowed to seize your car and sell it to satisfy the remaining loan balance.

Remember, having a lien on the title of your vehicle doesn’t mean you will lose access to your main source of transportation. If you keep up with your monthly title loan payments, you can continue to drive your car as you normally would! Repaying your debt obligation is the easiest way to remove the lien from your car’s title. If you face any financial issues during the repayment process, it’s recommended to communicate with your lender before you miss a payment.

Apply for an Auto Title Loan Online!

If an auto title loan sounds like the right choice when you need fast money, know that the best place to get a title loan can be from the comfort of your home!

Through ChoiceCash title loans, you can submit an initial online application at any time of day or night – so applying for title loans open on Sundays is no problem at all! If you are qualified for a loan against your car, then you can expect perks like flexible loan terms and zero prepayment penalties. Submit a brief prequalification form online today to start your application, or call 855-422-7402 if you have any questions about applying for ChoiceCash title loans serviced by LoanMart.¹

Frequently Asked Questions About the Lienholder on a Car Title

Are you thinking about adding a lienholder on a car title? Here are some of the most commonly asked questions that can help you learn more about this process:

What Is the Difference Between Owner and Lienholder?

The terms “owner” and “lienholder” may sound like similar concepts, but they have a very distinct difference. The owner has every right to sell, use, or control the property or asset in question. In comparison, a lienholder only has a legal claim to the car, property, or applicable asset while there is a lien against it. They can take action if the owner does not pay off their debt obligations, but they cannot modify or use the asset while the borrower pays off the loan.

Is a Lienholder the Same as a Loan?

No. A lienholder is the individual or entity that issues a loan to finance the purchase of a property, while a loan is the money they lend to a borrower with an agreement to pay it back.

Are There Any Specific Lienholder Car Insurance Requirements?

Lienholders are allowed to mandate comprehensive and / or collision car insurance coverage to protect their investment. Liability coverage is required by law in most states, but the exact type of coverage you will need during the repayment process for a loan with a lien on your car’s title can vary, so it’s important to discuss the requirements with the appropriate party before you sign a loan agreement.