What Does a Lienholder on a Car Mean?

If you’re looking into a title loan, you can be certain terms like “lien” and “lienholder” will come up. Once you understand what a lienholder is, how it affects your title, and what to expect when taking out a title loan, you’ll be able to move forward with confidence.

What Is a Lienholder on a Car?

A lienholder is a lender, such as a bank, dealership, or title loan provider, that loaned you money using your car as collateral. The lienholder’s name is listed on your title, giving them the right to repossess the car if you don’t repay your loan. During the loan payoff period, you maintain possession of the car and drive it as usual, but the lender technically shares ownership until the loan is paid off.

What’s the Purpose of a Lienholder?

The lienholder’s primary role is to protect their financial interest. Since they have a legal claim to your vehicle, they can take it back and recover their losses if the loan goes unpaid.

While this sounds scary, it can actually work in your favor as a borrower. After all, using your car as collateral is what makes it possible to take out a title loan, giving you access to fast cash without selling your vehicle.

How Does a Lien Affect You as a Car Owner?

Having a lien on your car impacts your insurance requirements. Lenders typically require full auto insurance, including collision and comprehensive policies, to protect the car from damage or loss. Your insurer will list the lienholder on the policy and notify them of any lapses in coverage.

Once you pay off your auto loan, show proof of lien release to your insurance company to have the lienholder removed from your policy. You can then change your coverage if desired.

Note that you can’t sell a car with an active lien unless you pay off the balance. Most buyers won’t proceed without a clear title, so it’s important to resolve any liens first.

How Long Does a Lien Stay on a Car?

A lien remains on your car until the loan is fully repaid. Once the final payment clears, the lienholder is required to release the lien, usually within a few business days. Electronic lien titles may update to a clear title automatically, while paper titles may require a lien release form. If you’re not sure your lien was removed, call or visit your local DMV to confirm your title status.

What If the Lienholder Doesn’t Release the Lien?

Occasionally, a lienholder may fail to release the lien even after you’ve paid off the loan. This can happen if the lender goes out of business or if there’s a clerical delay. In these cases, you can submit a lien release request to the DMV, along with payment records or other proof that the debt has been paid.

Why Choose VIP Title Loans?

With the lowest rates in Texas, flexible repayment options, and money-saving terms, VIP Title Loans is the top choice for fast cash when you need it most. We make it easy to get out of a financial bind without giving up your vehicle. Call us, complete our simple online application, or visit one of our five convenient DFW Metroplex locations today.