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Car for College - Make Sure You Have a Clear or Lien-free Title?

Jul 14, 2017


Many people end up purchasing vehicles through a loan method. When this happens, a lien is placed on the vehicle's title by the loan institution until the loan is paid off. During this time, the loan institution technically owns the vehicle. In order to clean up any gray area on the matter, here is a further look at a title loan if you have a clear and lien-free vehicle title.

Checking for Other Liens on the Vehicle Before it is Purchased


All loan institutions need to do some research on a vehicle's title before they issue a new loan on it. If there is a pre-existing lien against the vehicle, then that lien has to be cleared before a new lien can be placed on it. This situation can be problematic for instances where someone might be trying to sell a vehicle without going through an auto dealership. In order to have the right to sell that vehicle without going to a third party, the lien against the vehicle must be cleared first. Otherwise, a new lien might be denied on the vehicle until that previous lien is paid off. In short, multiple liens cannot be placed on one vehicle at any given time.


People looking to buy a car outright from another person without going to a dealership can check for liens against vehicles themselves. Services like those found at Car Fax usually provide this check for a relatively low price or completely free. The only information needed is the car's VIN.


Paying Off the Car Loan Sooner Rather than Later


The first step to gaining a lien-free vehicle title is to focus on paying off the loan for that vehicle promptly. All loans come with a set time frame of when the vehicle has to be paid off, which helps to determine what the monthly loan payments on the car have to be. It is important to note, however, that this time frame is the maximum length of time a person has to pay off that car loan. 

If larger payments can be made within that time frame, then the loan will be paid off sooner. Some people just pay their loans by rote habit for the sake of just meeting their minimum monthly payments. People need to understand this one fact, though: that monthly payment is just as stated above, a minimum due. The sooner a car loan is paid off, the sooner the lien on the title will be lifted. 

Having a Lien-Free Title Actually Means True Ownership


As eluded to previously, a person does not own their vehicle until the lien against it has been paid off. The only way to have a vehicle title that is clear and free means the loan institution releases the title to the vehicle owner without anything imposed against it. Usually, a new title is issued without the lien. Some institutions do not include the cost of generating this new title in the cost of the loan, so vehicle owners need to beware that there might be an extra cost involved.

If a person is in a tight situation where they need access to some money fast, they need to be aware that their vehicle cannot be used as collateral for a loan, no matter how small, until that original loan is paid off. Not any one loan institution of reputable standing will place a second lien against a car if one already exists. 

Once the loan is paid and the title is clear, a situation might arise where a second loan can be used with the vehicle as collateral. Not all loan institutions are willing to go this route, though. Paying off the loan is the only way to have the title loan if you have a clear and lien-free vehicle title.

Obtaining a lien-free vehicle is a logical process. The outstanding loan needs to be paid before the car is sold to someone else. A loan institution will only make the person with the loan a full owner if the title loan if you have a clear and lien-free vehicle title.


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