A Step-by-Step Guide To Removing A Lien From Your Car's Title

Mar 22, 2023 By Kelly Walker

The lender's name is recorded as a "lien holder" on the vehicle's certificate of title when a loan or other financing is used to pay for the purchase. A lien is a creditor's legal claim to ownership of specific property that secures debt payment. Liens are commonly used to ensure the repayment of loans secured by personal property.

If the debt is not paid, the creditor might take possession of the collateralized asset. When the loan is paid off in full, the lien holder's name is removed from the title, and the car can be sold with only a few simple forms filled out by the legal owner.

However, the choice is taken to sell the vehicle before the lien holder is paid in full. In that case, the seller has many alternatives for releasing the lien holder's interest in the car and transferring ownership to the buyer.

Using A Car Lot To Make A Sale

A car dealership is the best place to sell a car with a lien since they can help you eliminate the lien and get the most money from the transaction. Dealers coordinate the transfer of ownership with the credit union or bank identified as the lien holder on the title.

The loan sum is paid in full, and the dealer facilitates this payment by deducting the payback amount from the loan used to purchase the new automobile or adding it to the loan used to buy the trade-in vehicle.

The major drawback of selling a car with a lien through a dealership is that the price paid for trade-in automobiles is typically less than what can be realized when selling it privately. Yet, there is more work for the seller when dealing with a private bidder.

The Lender's Office is the Place of Sale

This is the quickest way to transfer ownership of the vehicle, settle the debt, and clear the lien from the title. Also, after an agreement has been struck, this is the quickest way for the seller to receive the money from the sale if there is a lien on the certificate of title.

Payment for the loan and the execution of the paperwork transferring ownership to the buyer can be completed in a single meeting by either the buyer or the seller. Call beforehand to ensure a local lender representative can handle the transaction, regardless of the institution's size. Also, you and the purchaser must be physically present during the sale.

Purchaser Pays Off Lien

If the buyer cannot physically visit the lender's office to finalize the deal, they can pay by wire transfer or cashier's check. Both options can be used to settle a lien and pay off the seller. The customer has more peace of mind with this choice. Why? Because the money doesn't have to go via the seller first, who would then have to send it to the lender to pay off the loan. Instead, the money goes straight to the lender.

Use an Escrow Service

The real estate business frequently uses escrow accounts, similar to holding accounts. Vehicle sales are only one example of an industry where this service may be helpful.

A third party is used as a holder of funds until the transaction is finalized in an escrow account. This third party is objective and has no vested interest in the transaction's outcome.

Escrow accounts ensure the safety of all parties involved in a transaction by allowing a third party to check the buyer's finances, certify the release of the lien holder, and smooth the transfer of ownership.

The cost of hiring an escrow service is added on top of the car's sale price and is calculated as a percentage. As an escrow account safeguards the interests of both the seller and the buyer, the service cost is often divided evenly.


Although they are an annoyance, liens must be cleared before any property, including cars, can be bought or sold. Although it may be challenging to sell your automobile with a lien on it, it is possible.

You can sell through a dealer, at your lender's office but the procedure might appear laborious and may need you to jump through some hoops. A neutral third party, such as an escrow agency, may also be used to remove the lien from the title of the automobile before it is transferred to the buyer.

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