What Is a Lienholder on a Vehicle? How does it work?

What is a Lienholder On My Car?

a lienholder is a person or entity that has a legal claim to an asset, like a piece of property, a vehicle, or a home, which has been purchased with financing. When you're financing a vehicle this is typically the bank or lender that you borrowed from.

Since they hold the note or have a lien on the property, this means if something happens and you cannot pay, they get the right to repossess your car.

Ways to Find Vehicle Lienholder Information

Your lienholder is the lender that gave you a loan to purchase the car. If you’re not sure who the lienholder is, it could be as easy as pulling out the vehicle’s title. Car titles have the owner’s name and the lienholder’s information listed.

If you don’t have the title, you may be in a title-holding state. The majority of states are, which means the lender holds the title until the loan is paid in full.

If you want to know who the lienholder is but you don’t have the title, you can contact your local DMV or Secretary of State (SOS) and give them your vehicle’s identification number (VIN), make, and model.

Your VIN is a unique sequence that only your car has. Typically, it's located on the driver’s side dashboard where it meets the windshield. It’s etched on a metal plate, which should be just visible through the bottom of the windshield. It’s In some states, you can also request a replacement title for a fee.

You can also contact the dealership where you purchased the vehicle and ask them to look up who your lender is.

How To Add A Lienholder To Your Insurance Policy?

When you get a new car or refinance an existing loan, you will need to list the lender on your insurance policy as the lienholder. The process is simple, but it involves a few steps.

• Collect your lienholder's information, including name, address, phone number, and account number, and provide them to your insurance company along with the information on your vehicle.
• Let your insurance company know about any lienholder requirements. This typically includes having full coverage insurance, which is a requirement when you're financing.
• After this, the insurance provider typically follows up with the lienholder to provide confirmation that they're on your policy. It's a good idea to check in with your lender to ensure everything is on track.

Remember, once you list the lienholder on your insurance policy this means that if something happens to the vehicle, your lender will get paid by the insurance company before you see the remaining money, if there is any.

How To Get A Lien Removed From A Car Title

To remove a lien from a vehicle you must pay off the loan. Once the loan is paid off, the lien is removed. You can’t transfer ownership to anyone until the lien is removed, which means you won't be able to sell the car because the lienholder is the legal owner while there's an outstanding loan.

Until the loan is paid off, the car is still the lender’s property because they loaned you the funds to purchase the vehicle. This also means that if you default on the loan, or miss any payments, the lienholder can repossess the car.

Once you’ve paid off your vehicle, though, the lien gets removed and you get a release of lien letter from the lender. Once you have the release, you’re in the clear! You can either get a new title with the lienholder removed or keep the release of lien letter with the car’s title.

Conclusion

If you haven’t paid off your auto loan there is most likely a lien on your vehicle. This means you're not the sole owner of the car. If you need to trade in your car or sell it, you have to pay off your loan first. ownership of the car can't be transferred to someone else until the lien is removed.

But, now that you know how to find out who your lienholder is, you can work to successfully sell or trade-in your vehicle.

Frequently Asked Questions (FAQ)

Here are some frequently asked questions regarding auto liens and who your lienholder is.

Is a lien holder the same as a loan?

The lien holder is typically your lender. If you don't know which lender you're working with you can contact the dealership where you purchased the vehicle, and find out who your loan is through. All this information should be in your loan paperwork.

If there is a loan for your vehicle that you're paying, there is a lien on your car.

What's the difference between a lienholder vs. a loss payee?

A loss payee is the person who gets first dibs on any money from the insurance company should anything happen to your car such as a theft or accident. This is typically the lender, though there can be other named loss payees that can stake a claim to any money the vehicle may have been insured for, though this isn't usually the case.

Can I buy or sell a car with a lien?

No. You can't legally buy or sell a vehicle with a lien, because a lien would denote that a person other than the seller owns the car. If you do unwittingly purchase a car from a private seller and then find out that there is a lien on the title, you may be responsible for paying the lender what's owed on the vehicle. This is why it's important to ensure that a car from a private seller has a clean title before you hand over the cash.

You also won't be able to sell a vehicle with a lien on it, since typically, your lender is either holding your title if you have yet to pay off your loan.