When you owe a business money, it may place a lien on your car or motorcycle's title, indicating it has a right to possess your vehicle if you continue to not pay. Title liens typically occur because you took out a loan to buy the vehicle, you obtained a personal loan (with or without your vehicle as specific collateral), or you failed to pay for services you obtained. The lien means the lender or service provider has the right to repossess your vehicle if you do not pay the business back on time. It also means the lender, a.k.a. the lienholder, has the right to be paid in full first if you sell the car or motorcycle.
How to Remove a Lien From Your Car Title
The best way to have a title lien removed is to pay your debt. Either pay your loan in full or pay for the services you obtained. Once the debt is paid in full, ask in writing for a written release of the lien. Once you have fulfilled your debt, you will have to work with the Department of Motor Vehicles to get a new, clean title.
If you cannot pay the debt in full, work with the lienholder to either refinance your loan without your vehicle as collateral or negotiate a payment plan with the service provider.
Read More: What Does "Release of First Lien" Mean on a Car Title?
Selling a Vehicle With a Lien
If your vehicle has a lien on the title, you can sell it, but you may need the lienholder’s permission. You must also make sure the lienholder is paid back from the sale.
If you want to sell a car or motorcycle with a lien on the title, carefully consider how much you need to make from the sale. You must be able to pay the lienholder from the sale. You also must be able to pay back your auto loan provider, who may be separate from the lienholder. For example, the lienholder may be a bank that lent you $1,000 a few months ago, which you have been unable to pay back.
If you owe more than the vehicle is worth, you may be in trouble. You might have to sell the car or motorcycle for as much as you can and then pay off the rest of your debt yourself.
If you successfully sell your vehicle with a lien, you must have the lien officially removed from the title, otherwise the new owner cannot register the car or motorcycle.
Buying a Vehicle With a Lien
When you buy a used vehicle or motorcycle, find out if there is a lien on the title. Look at the physical title of the vehicle where lienholders may be listed. You can also use a number of other online methods to double check for electronic liens that are not on a paper copy of the title.
If there is a lien, you must address it. The seller either needs to have the lien removed from the vehicle prior to the sale, or you need to negotiate how the lien will be paid so that you can take full possession of the vehicle’s title and register the car. You may be able to pay the lienholder directly and then pay the remainder of the sale price to the seller. However, you would need the creditor’s cooperation.
Do not pay the seller and trust him to pay the lienholder and have the lien removed. The seller could pocket your cash and leave you responsible for the debt.
Finding Out About a Lien on Your Used car
If you bought a used car and then found out it had a lien on the title when you went to register it, there are a few steps you can take. However, you are at risk of having the vehicle repossessed or becoming liable for the debt yourself.
Contact the seller. It may be that the seller paid the underlying debt and needs to get the lien officially off the title. If you cannot contact the seller or she is uncooperative, contact the lienholder, or better yet, a lawyer.
If you are held responsible for the lien, you may need to consider filing a civil legal claim against the seller for the money he cost you.
A lien title on a vehicle means you don’t own your car outright, and a creditor has the right to repossess your car if you fail to repay your loan.
Victoria E. Langley is a legal content writer living in the Pacific Northwest. She holds a B.A. in philosophy from Northern Illinois University and a J.D. from the John Marshall Law School of Chicago. She has worked as a clerk for a boutique law firm handling breach of contract litigation, a corporate document reviewer, and a legal counselor for a transactional law clinic. She now focuses on translating legalese into everyday language for firms around the country. Her work has appeared on the U.S. News Law Directory and many law firm's sites. Learn more from her website, langleylegalwriter.com