Removing the lien from your car means that you are cleared from the financial obligation in a car loan. You can actually do this as soon as the last payment for the car loan is paid. Removing the lien can be accomplished using the steps written below.
1. Secure a letter of loan satisfaction from your present lien holder. This letter is important in removing the lien from your car documents. This is a proof that you already paid the entire amount of the loan.
2. Fill out all the necessary forms involved in removing the lien. This is used to finalize your full ownership of the car. Send the copy of these forms together with the letter of satisfaction from the lien holder to the Department of Motor Vehicles (DMV).
As soon as the DMV receives what you have sent, the agency would then start processing the removal of lien from the car documents. You only need to wait for the DMV to send the copy of the car’s new title free from the lien holder.
3. Inform your insurance provider about the removal of lien. The insurance company might have an endorsement for Addition Insured and Loss Payee where the lien holder is registered as a loss payee and additional insured. Get this endorsement removed from the lien holder.
You need to get the lien holder removed from the insurance policy because in the event of accident, the insurance company is obliged to issue a check of payment in the name of the registered owner. This means that although you already paid off the loan and the lien holder remains as the registered owner, all of the payments for accident claims would be issued to the lien holder.
4. Keep the letter of loan satisfaction in a safe place. This is useful in the event that someone questions your ownership of the car. Someone might also question whether you are able to pay the loan off or not. The letter will be the greatest proof to support your claim about the car’s true owner.