A lien on the title is a legal claim on the car. The lienholder is the technical owner, and is usually a bank or financing company that gave you the financing to purchase the vehicle. The lienholder has a secured interest in the vehicle and will until you repay the full loan amount. They can repossess the vehicle if you don’t pay as outlined in the loan agreement.
Key Takeaways:
- What is a lien? A lien gives a lender the legal right to your car until you pay off your debt. If you stop paying, they can take the car and sell it to get their money back.
- Who is the lienholder? The lienholder is whoever you owe money to, usually a bank, car dealership, or title loan company. Their name appears on your car title until you pay off the loan.
- What can you do with a lien? You can drive your car normally and maintain it as usual. However, you cannot sell it or transfer ownership until the lien is cleared.
- How to check for liens: Search your state’s DMV website for free using the VIN, check the physical title, or use a paid service like CARFAX or NMVTIS.
- How to remove a lien: Pay off your loan, get a lien release from the lender, and file it with your DMV. Processing typically takes 2-4 weeks by mail or 3-5 business days electronically.
- Selling a car with a lien: You can sell it, but the lien must be paid off first. The buyer cannot get a clean title until the debt is cleared.
- Title loans with a lien: If your car already has a lien, some lenders offer “second lien title loans“. Approval depends mainly on your ability to repay (income proof), not just your car’s equity value.
What is a Car Title?
A car title is a legal document that shows ownership of a vehicle and includes information about the owner and vehicle. It’s different from the registration, which most states require to legally drive a car. A car title simply demonstrates ownership.
What is a Lien on a Car Title?
A lien on a car title is a legal claim against your vehicle. It gives someone else (usually a lender) the right to your car if you don’t pay what you owe.
Think of it this way: when you finance a car, the bank helps you pay for it. In return, they put a lien on your title. This protects them. If you stop making payments, they can repossess the car and sell it to recover their money.
The lien stays on your title until you pay off the loan in full. Once you do, the lienholder sends a lien release to your state DMV. Then you own the car “free and clear.”
Who Can Hold a Lien on Your Car?
A lien on your car can be held by banks, credit unions, dealerships, or private parties who gave you a loan to buy your vehicle. A lien can also be placed by a mechanic for unpaid repair work, or by a creditor who sued you and won.
There are Two Kinds of Lienholders:
Voluntary Lienholders (You Agreed to It)
You signed a loan and agreed to let them put a lien on your car until you pay it back.
- A bank or credit union
- A car dealership that financed your purchase
- A title loan company
- A private lender (like a family member)
Involuntary Lienholders (You Owe Money)
You didn’t sign a loan, but you owe them money. They can put a lien on your car until you repay the debt.
- A mechanic or repair shop (unpaid repair bill)
- The IRS or state tax agency (unpaid taxes)
- A court (creditor sued you and won)
- The state (unpaid child support)
Good to know: Involuntary liens can surprise you. Someone can put a lien on your car without you knowing if you have unpaid debts.
How Does a Lien Affect You?
A lien limits what you can do with your car.
What You CAN Do:
- Drive your car normally
- Maintain and repair your car
- Keep your car insured
What You CANNOT Do:
- Sell the car without paying off the lien first
- Transfer the title to someone else
- Use the car as collateral for another loan (unless it’s a second lien title loan)
Watch out: If you stop making payments, the lienholder can repossess your car. According to each state law, they don’t always need to go to court first before doing so. claim against the vehicle. It’s not the same as ownership.
When you purchase a vehicle, you are the owner. However, if you finance the car, the lender is the lienholder and can take the car if you don’t follow the agreement.
How to Put a Lien on Someone’s Car
Did someone damage your property or owe you money?
In some situations, you have the legal right to place a lien on their vehicle. The process requires proper documentation and following your state’s legal steps.
Common examples include mechanics filing a lien for unpaid repair bills, private lenders securing a lien when lending money for a car purchase, and courts placing judgment liens after someone loses a lawsuit.
Each state has specific filing requirements, fees, and deadlines. Miss the deadline and you won’t be able to place the lien at all.
How to Check If a Car Has a Lien
Before buying a used car, always check for liens. It protects you from unexpected debt left on the car you plan to purchase.
You can search your state DMV website for free using the VIN. Alternatively, you can check the physical title for a lienholder’s name, or use a paid service like CARFAX (around $39.99) or NMVTIS (free or low cost through approved providers).
We walk you through how to check if a car has a lien, including free options and what to do if you find one.
Can You Sell a Car With a Lien?
Yes, but you must pay off the lien first. The buyer cannot get a clean title until the debt is cleared. You have options: sell to a dealership (easiest), sell to a private buyer (higher price but more coordination), or use an escrow service (safest but has a fee).
Here’s how to sell a car with a lien, with step-by-step instructions for each option.
Important Jail/Fraud Warning: Selling a car without disclosing the lien to the buyer is illegal. Depending on your state, you could face civil penalties or criminal fraud charges. Always disclose existing liens before completing a sale.
Learn about the legal consequences of selling a car with a lien.
How to Remove a Lien From Your Car Title
To remove a lien, you must pay off the debt first. There is no other option. Once the balance is cleared, request a lien release document from your lender and submit it to your state DMV.
Processing times vary by state. By mail, expect 2-4 weeks. States with electronic lien systems (like California and Texas) update records in 3-5 business days.
We explain how to remove a lien from a car title with state-specific instructions.
Can You Get a Title Loan If Your Car Has a Lien?
It depends. Most lenders won’t offer a first-position title loan if your car already has a lien. However, some lenders offer second lien title loans. Because this is higher risk for the lender, these loans come with higher interest rates. Consider it carefully and only use it for emergencies.
Title loan approval depends primarily on your ability to repay (income proof), not just your car’s equity value. People with bad credit, past bankruptcy, or who are currently unemployed are welcome to apply.
Still Making Payments on Your Car?
If you’re still paying off your auto loan, you may still qualify for a title loan. This works differently than a second lien.
Here’s how it works:
Instead of adding a second lien, the title loan lender pays off your remaining auto loan balance and becomes the only lienholder. Your remaining car equity determines how much you can borrow, typically 25% to 50% of that value.
For example, if your car is worth $15,000 and you owe $5,000, the lender pays off the $5,000 for you. Based on the remaining $10,000 equity, you could receive between $2,500 and $5,000.
To qualify, you typically need:
- Proof of income
- Positive equity (car worth more than you owe)
Good to Know: Practical Tips
- Keep lien release documents. Store them in a fireproof safe, secure filing cabinet, or scan them to a cloud storage service like Google Drive. You may need them years later to prove ownership.
- Check your title after paying off a loan. Search your state DMV’s online portal or request a title status check by VIN to confirm the lien was properly removed.
- Know your state’s rules. In some states (called “title-holding” states), the lienholder keeps the physical title. In others, you get the title with the lien noted on it.
- Act fast if you spot an error. Contact your DMV immediately if your title shows a lien that should be cleared. Bring your lien release document as proof.
- Be cautious with private sellers. They may not disclose existing liens. Always verify independently through your state DMV website or NMVTIS (the National Motor Vehicle Title Information System, run by the U.S. Department of Justice).
Lien Rules by State
Lien processes vary by state. Here’s what to know in the most common states:
California
California uses an electronic lien and title (ELT) system. When you pay off your loan, the lienholder electronically releases the lien. The DMV then mails you a clean title within 7 to 10 business days. Visit the California DMV for more information.
Texas
Texas also uses electronic liens for most lenders. After payoff, your lienholder has 10 days to release the lien. You can check title status through TxDMV’s Title Check using your VIN.
Florida
In Florida, the lienholder must send a lien satisfaction to the Florida DHSMV within 10 days of payoff. You can then apply for a new title without the lien. The fee is around $75.
Georgia
Georgia requires lienholders to release liens within 10 business days of payoff. You can check lien status through the Georgia Department of Revenue motor vehicle division.
FAQs
What Does It Mean When a Car Title Has a Lien?
It means someone else has a legal claim on the vehicle. Usually, this is a bank or lender who helped finance the car. The lien stays until the loan is paid off.
Can I Register a Car With a Lien on the Title?
Yes. You can register and drive a car with a lien. You just cannot sell it or transfer ownership until the lien is cleared.
How Long Does a Lien Stay on a Car Title?
A lien stays until the underlying debt is paid in full. This could be 3 to 7 years for a typical auto loan, or longer if you refinance.
Does Having a Lien Affect My Insurance Rates?
No. A lien itself does not raise your insurance rates. However, lienholders often require you to carry full coverage (comprehensive and collision), which costs more than basic liability.
Can Someone Put a Lien on My Car Without My Knowledge?
Yes. Involuntary liens like tax liens or judgment liens can be placed without your consent if you have unpaid debts. Learn what to do if someone puts a lien on your car without you knowing.
How Do I Get a Lien Release After Paying Off My Title Loan?
Your lender provides a lien release document after you pay off the loan and notifies the DMV. Here’s how to get a lien release after paying off your title loan.
Can I Add or Remove a Name From My Title if There’s a Lien?
It’s possible, but you need the lienholder’s permission. They must approve any changes to the title. Here’s how to add or remove a name from a car title with a lien.
Final Thoughts
A lien on a car title is a legal claim that protects lenders when you borrow money. You can drive your car normally, but you cannot sell it until the lien is removed. Always check for liens before buying a used car. And when you pay off a loan, make sure to get your lien release and update your title.
If you have questions about title loans or need help understanding your options, we’re here to help.