Car Liens: How to Check, Remove, and Buy or Sell With One

A car lien is a legal claim a lender has on your vehicle. The lien remains until you pay off the loan completely.

When you finance a car, the lender places a lien on the title. The lien gives them the right to repossess your car if you miss payments. You can check for a lien by reviewing the title or getting a vehicle history report. You can also search your state’s DMV database.

Buying or selling a car with a lien requires extra steps. You must ensure the lien is properly removed before transferring ownership.

What Is a Car Lien?

A car lien gives a lender legal rights to your vehicle. If you don’t repay your auto loan, they can take it back.

When you finance a car, the lender protects their investment with a lien. The lien stays on your car’s title until you pay off the loan.

If you stop making payments, the lender can repossess your car. They sell it and use the money to cover your remaining balance. Once you pay off the loan, the lender removes the lien. You become the full owner of your car.

Who Is the Lienholder on a Car?

The lienholder is the person or company holding the legal claim on your vehicle. They maintain this claim until you pay off the loan fully.

If you have a car loan, the lienholder is usually your lender. Banks, credit unions, auto dealerships, and financing companies can be lienholders. Sometimes a private lender can also hold a lien.

The lienholder has a security interest in your car. Their name appears on your vehicle’s title. They have the right to repossess your car if you break the loan terms.

How Does a Lien Affect Your Insurance and Title?

A lien can increase your monthly insurance costs. Your premiums may be higher than expected.

When you finance a car, the lienholder requires comprehensive insurance. Coverage protects their investment if your car is damaged or totaled. Comprehensive insurance costs more than basic liability coverage.

A car lien also affects your vehicle title. The lienholder’s name appears on the title until you pay off the loan. Their name shows they have a legal claim to your car.

Once you pay off the loan, the lienholder removes their name. You become the full legal owner. Your title is now “free and clear.” No one else has a claim to your vehicle.

How To Check If a Car Has a Lien

You need to know if a lien is attached to a title. Whether you’re buying a used car or checking your own vehicle, liens matter.

A lien means someone else has a legal claim to the car. Until the lien is paid off and removed, full ownership rights are limited.

Here are the best ways to check for a lien:

• Check the car’s title: The title lists any lienholders with their contact information. An active lien means the lender still has a claim.
• Review loan documents: If you financed the car, your paperwork includes lienholder details.
• Search the DMV database: Some state DMV websites let you check lien information online. Use the vehicle identification number (VIN) or license plate number.
• Get a vehicle history report: Services like Carfax or AutoCheck show lien records and past ownership.
• Ask the seller for proof: The seller should provide a lien release document showing the debt was paid.

If a lien is still active, the seller must pay off the loan first. Contact the lienholder to confirm the payoff process. Ensure the title is cleared before transferring ownership.

Can Someone Put a Lien on Your Car?

Yes, a lien can be placed on your car in certain situations.

Most car liens come from lenders when you finance a vehicle. Other types result from unpaid debts, legal claims, or government actions.

Here are common reasons for a lien on your vehicle:

• Unpaid auto loans: If you finance a car and stop payments, the lender keeps a lien until repayment.
• Mechanic’s lien: If you don’t pay for car repairs, the shop may place a lien. They can keep or sell your car to recover the amount.
• Child support liens: Some states allow enforcement agencies to place liens for unpaid child support.
• Judgment liens: If a court orders you to pay a debt, creditors may place a lien.
• Tax liens: Government agencies may file liens if you owe back taxes.

If you discover an unexpected lien, check with your state’s DMV. Find out who placed it and why. You typically can’t sell or transfer ownership until you pay it off.

How To Buy or Sell a Car With a Lien

You can buy or sell a car with a lien. The lien must be cleared or properly transferred first.

Work with the lienholder to ensure a smooth transaction. Whether you’re buying or selling, proper handling is essential.

Steps To Sell a Car With a Lien

If you’re selling a car with a lien, work with your lender. Ensure a legal and smooth title transfer.

Here are your options when selling a car with a lien:

• Pay off the loan before selling: If possible, pay the remaining balance. The lienholder can then release the title.
• Sell through a dealership: Many dealerships handle the lien payoff if you trade in.
• Process the sale at the lender’s office: The buyer can pay the lender directly. The lien is removed before title transfer.
• Use an escrow service: If you can’t pay off the lien upfront, escrow holds the buyer’s funds.
• Have the buyer assume the loan: Some lenders allow buyers to take over the existing loan. Lender approval is required.

Steps To Buy a Car With a Lien

If you’re buying a car with a lien from a private seller, verify proper handling first. Don’t finalize the sale until the lien is addressed.

Here are the steps to follow when buying a car with a lien:

1. Check the title for liens before purchasing. The seller should provide proof that any lien is paid off.
2. Work with the lender directly. If a lien is still active, pay the lender directly. Don’t give money to the seller.
3. Use an escrow service if needed. Escrow ensures the seller’s loan is paid before title transfer.
4. Confirm the lien release with the DMV. Work with the lender to ensure payoff before completing the sale. Verify the title is clear before finalizing the transaction.

How To Remove a Lien From a Car Title

Once you fully repay a car loan, the lienholder removes the lien. You become the full legal owner.

In most cases, the lender notifies the DMV. They provide you with a lien release document or a new, clean title.

Here’s how to ensure proper lien removal:

• Confirm with your lender: After your final payment, check with the lienholder. Ensure they’ve processed the lien release.
• Obtain a lien release document: Some states require a notarized lien release. You may need to submit it to the DMV.
• Update the title with the DMV: You may need to apply for a new title. Some states issue it automatically, others require a request.
• Check your state’s requirements: Every state has different lien release rules. Your DMV’s website has details on the exact steps.

Once the lien is officially removed, you can sell the car. You can transfer ownership or update your auto insurance coverage. If you’re unsure whether your lien has been cleared, a quick title check confirms the status.

💡 Visit your local DMV’s website for more information. Find details about titles, ownership transfers, and private party sales.

If you’re struggling with auto loan payments or other debts, our partner Cambridge Credit Counseling can help you explore debt management options.

Frequently Asked Questions About Car Liens

Car liens can be confusing when you’re dealing with them for the first time. Here are answers to common questions about how liens work.