Can a Car Title Be Transferred With a Lien

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If you are in the process of buying a car, a car lien may be a part of this process. To learn more about car liens and what to expect when buying a car with a lien, continue on.

Car Liens: What Are They?

A car lien is essentially an insurance policy for lenders. If you are taking out a loan to purchase a new or used car, a lender wants to make sure they are protected if you default. In order for them to receive the protection they are looking for, they use car liens. The car you purchase has a lien on the title until you completely pay off the car. Not only does a lien act as insurance for a lender, but a lien also allows a creditor to repossess your car if you default on your loan. A lien is a right against property or a legal claim, according to The Balance.

What Happens to My Car Title after the Loan Has Been Paid Off?

Just because you have a car lien doesn't mean you can't drive your vehicle. You still get to drive your car, you just can't receive the title until you have fully paid off your loan. Once you have paid your loan in full, the lender can sign the title over to you to signify they have released the lien. Once this process is complete, you will receive your title in the mail or you can pick it up in person. You then have a free and clean title, according to TFC Title Loans.

Can I Sell a Car That Has an Auto Lien?

You can sell a car with a lien, but the lender has the first right to any money you make on the sale. You cannot receive this money until you have paid the lender in full. An individual who is buying a car with a lien can write two checks in this circumstance. The first check is to the bank or finance company who holds the lien, and the second check is for you if they are paying more for the car than the loan payoff amount. With the receipt of a check, the lender would transfer the title to the new buyer, according to Cars Direct.

Who Files for a Lien?

If you are buying a car through a dealership, the dealership will likely file the lien for you. If you already have a title and you need to add a lien to this title, you can follow your state's guidelines. You will have to file a UCC-1 form, according to The Balance Small Business.

What Is a Lienholder?

A lien holder is the lender that holds the lien. A lienholder may be leasing a car to you while collecting interest, or they gave you money to purchase the vehicle. If you are financing your car through a bank, private lender, or dealership, they are the lienholder. The lienholder owns your car while you make payments on it. If you default on the loan, the lienholder can repossess the vehicle.

What Should Be Considered When Buying a Car?

When buying a car, you want to determine if it already has a lien on the title. If you are buying a new car, you know it does not have a lien because you are the first owner. If you are shopping used at a dealership, ask the salesperson if there is a lien on the vehicle. If there is, the dealership will likely handle the necessary paperwork. If you are buying used from a private seller, you need to check the lien status on your own. If the vehicle has a lien, it is the seller's job to make the necessary arrangements to pay off the loan and transfer the title to you, according to Road Loans.

What Are the Types of Liens?

Consensual liens
Statutory liens
Construction liens
Tax liens

Consensual Liens

A consensual lien is a lien that you agree to. If you have a consensual lien on your title, you agreed to the loan terms and conditions and are willingly making payments on your vehicle.

Statutory Liens

A statutory lien is a lien that was obtained through the court because of unpaid bills. Statutory liens can include tax liens. An example of a statutory lien is if a contractor performed work for a homeowner, but the homeowner never paid the contractor. The contractor could then file for a statutory lien against the homeowner.

Construction Liens

Construction or contractor liens are liens that are filed against a property owner who didn't pay their contractor. This can happen if a plumber or home renovator goes unpaid after performing a job for a client.

Tax Liens

Any taxing authority can take out a tax lien. Examples of taxing authorities include a state or the IRS. Tax liens are filed when a tax payer does not pay their taxes. Before a taxing authority can file a lien, they must send a notice to the individual.

What Is an Example of a Car Lien?

Per Cars Direct, if a car is sold and a debt collector has a lien against the car for a set amount of money, the debt collector receives that money at the time of the vehicle purchase. If you buy a vehicle with a lien and have to finance it, the lender has the first lien and the debt collector has the second.

Advantages of a Car Lien

If you have poor credit, a car lien can be helpful. A lien can help you rebuild your broken credit. Liens have lower interest rates.

How Long Does a Car Lien Last?

The process of paying off a car lien can take five full business days, or a little longer.

What Should I Do After Paying the Loan in Full?

After paying a loan off in full, it is time to remove the lien. In order to get the lien removed, you need to contact whoever is holding the lien. This may be a bank, private lender, or the dealership you purchased the vehicle from. If you owe even the smallest amount of money on the lien, the lender has the right to repossess the vehicle if you do not make this payment.

Sources:

https://www.carsdirect.com/auto-loans/what-does-it-mean-when-a-collector-liens-a-car

https://www.tfctitleloans.com/what-is-a-lien-on-a-car-title/

https://roadloans.com/blog/what-is-a-lien-on-a-car

https://www.thebalancesmb.com/what-is-a-lien-and-how-does-it-work-398313

https://www.thebalance.com/liens-what-they-are-and-how-they-work-315611

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Can a Car Title Be Transferred With a Lien

Source: https://www.caranddriver.com/research/a32780340/what-is-the-meaning-of-lien-title/