During my years as a car dealer, I’ve been asked many times, “Can you get a title on a car that is not paid off yet?”.
The short answer is – it’s complicated.
When you still owe money on your auto loan, having the title solely in your name can be difficult. Essentially, the lender owns your vehicle until you finish making payments in full.
But there are some limited cases where you can obtain a title on a financed car before it’s fully paid off.
Relevant Articles To Read:
- Can You Get a Title Loan on a Financed Car
- Can You Sell a Leased Car?
- Can You Transfer a Car Loan to Someone Else
- What Does A Car Title Look Like
- How to Get a Copy of Your Car Title Fast
Table of Contents
Who Legally Owns Your Car During the Loan Term?
When you finance a car, the lender keeps the title document until the loan balance hits zero.
They have a legal right called a “lien” on your car during this period. The lien allows them to repossess your vehicle if you default on the loan.
So, even if you physically possess a copy of the title, it will list your lender as the legal owner until the lien gets removed.
That generally only happens once you make the final payment.
A few states allow drivers to hold titles with lender liens on them. But those liens still must get cleared for you to have full legal ownership.
Can I Get an Early Title While Still Making Payments?
Trying to get a title before your auto loan ends rarely goes smoothly. Since your lender owns your car, they control the title process. Here are your options:
Ask the Lender to Release Their Lien Early
It is unlikely, but some may allow this if you have an excellent payment history or make a large lump sum payment.
Pay Off the Full Remaining Balance
The cleanest path to your title. Calculate the payoff amount and square up your debt.
Apply for a Duplicate Title
If you lose your title, the DMV can reissue it with the lien still on it. You’d need lender approval first in most states.
Essentially, the lender has no obligation to put the title solely in your name until you satisfy the loan terms. Avoid any company promising an easy title before that point – it’s likely a predatory title loan scheme (more below).
Selling Your Car Before Payoff – How Does That Work?
Trading in your financed car when buying another or selling to a private party gets tricky without a lien-free title. But it is possible if you understand the process:
- When trading into a dealership, use the sale proceeds to pay off your old loan balance. The dealer handles paying your lender and getting a title. Any extra value gets applied to your new car purchase.
- For private sales, meet at your lending bank. Pay off the full lien amount with the buyer’s cash. Then you can sign over the title. Their DMV will issue an updated title in the buyer’s name.
- If your car is worth less than you owe, the process varies by state. The best approach is paying down the balance until you have positive equity first.
Should You Ever Consider a Title Loan?
Title loans let you borrow money using your paid-off car as collateral, keeping the title until repayment. You should avoid these even if you don’t have your title yet. Here’s why:
- Sky-high interest rates, often exceeding 200% APR
- Risk of repossession is higher than average loans
- Sets you deeper into debt instead of helping
Rather than resort to predatory title lending:
- Ask your lender about refinancing your current auto loan to lower payments
- Consider borrowing from other sources like credit unions with fair rates
- Build savings for large purchases rather than continually financing
Key Things to Remember About Car Titles
- Your lender owns your car and holds the title until you fully repay your loan
- Getting an early title with a lien is rare without paying the balance
- Selling an unpaid car involves extra steps but is possible
- Title loans carry massive financial risk and should be avoided
The bottom line
While you have options to obtain a title before your loan ends, each has downsides, and paying off your car loan in full remains the surest path to clear title ownership.
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