The Difference Between A Lien And A Title For A Vehicle

Title vs. Lien
So in the course of determining ownership of a vehicle, many times the phrase title versus lien comes up in the conversation. So what is the difference between a title of a vehicle and a lien on a vehicle? Well, a vehicle title is a certificate, it’s a legal government document, looks like this, that is issued by a government agency. In most states, that agency is called the Department of Motor Vehicle or Motor Vehicle Department. Sometimes it’s called the Department of Transportation. Some states have a different name like Secretary of State.

State Agencies and Titles
Either way, every state has a government authority that issues titles. It’s not a document you can buy from a company. You can’t print one out from the internet, can’t download a document. It’s a physical document, it’s kind of like a $100 bill, right? You can’t print a $100 bill from the internet.

What is a Lien?
What is a lien? Well, a lien is a claim against the title. So if you have a title for a vehicle and it has your name on it as the owner, if you borrowed money against that vehicle either when you purchased it or later on, there will be a section down here for lien holder where it’ll be filled in the name of that lien holder. The lien holder puts their name on the title record to protect their interest, to make sure basically they get paid back, and make sure that you pay the notes on that car. In order for you to get that title document in your hands, you have to have that lien removed from the title record. That’s called a lien release.

Lien Release and Title Document
If the lien is showing on the title record, in most states the Department of Motor Vehicles cannot give you the title. In fact, the lien holder, the bank, the lender, is probably holding on to that paper certificate. And when you pay them their last payment, then they give that to you.

Lien Controversy: Failure to Notify DMV
So what is the big controversy about liens and lien releases? Well, here’s what happens. Many times when a lien is no longer active, whether it’s paid off, whether it’s a charge off, a write-off, bankruptcy, or some other type of dissolution, the lien holder does not give any notice to the title authority, to the Department of Motor Vehicles.

Lien Holder Process
If you pay off the loan, all they’re going to do is take that title certificate they have in their file cabinet, stamp it paid, sign it, and mail it to you. They will not update the records at the Department of Motor Vehicles. As far as they’re concerned, there’s still a lien on the vehicle. The lender figures, well, you have the title, we signed it, so you’re good.

Cost of Filing Lien Releases
Why wouldn’t the lien holder just tell the DMV the lien is cleared? Well, here’s why: it costs money. In order to file a lien release, they have to pay a fee. It might only be 10 or 15 or 20 dollars, but imagine doing that a thousand times a day for all your customers. It’s $20,000 a day, it’s $100,000 a week, that’s $5 million a year. If they could save that money by not doing lien releases, that’s free money in their pocket.

Problems Without Lien Release
Plus now they have to have extra employees that do these filings, send them in. They’re saving a lot of money. So they figure they send you the title, it’s stamped paid, you’re good. Well, what happens if you lose that title? Well, then that’s a problem. Or what happens if another person buys that car and the title doesn’t go with it? That’s a problem because now, as far as the DMV is concerned, there’s still a lien showing.

Other Issues with Liens
What happens if you have a charge-off or a write-off? Well, the DMV definitely doesn’t hear about that. The lender is not going to tell them about a charge-off or a write-off, and that car is going to be encumbered, it’s going to be blocked until that’s cleared.

How to Remove a Lien
So how do you get the lien removed? Well, there are only two people in the entire world that can sign a document to remove that lien. One is the lien holder, the other is a magistrate or a judge. So here’s how you do it. First, send a lien release request package to the lien holder. Don’t try to do this by phone, don’t try to do it by email, don’t try to do it by any kind of message. Send a package.

Lien Release Package
Here’s an example of a lien release package. It’s got a bunch of documents in it, put it all together—a lien release, a letter of non-interest, a declaration, an affidavit. Four documents. Send it by mail to the lien holder. Don’t email it, don’t scan it, don’t text message it, put it on a piece of paper.

Why Mailing is Important
Here’s why: that lien holder company, and you’ve heard us say this before, does not have a team of people. They do not have a department of people sitting around waiting to do lien releases for people. Everybody in that company has another job, they’re working on some other task.

Making it Easier for the Lien Holder
So if you just call them up and say, “Hey, give me a lien release,” yeah sure, whatever. They have other jobs to do. They’re not going to go find—think about how long it takes to find these papers. In fact, when we do lien releases for customers, half the job is finding all the right forms, not so much filling them in, it’s finding the right ones.

Facilitating the Process
The lien holder is definitely not going to do it. So if you want to do it for them, that will get it done faster. Get all the right documents and then fill them in. Put the VIN number, your name, your address, all the details so they don’t have to do any work.

The Importance of Minimizing Their Effort
Because as soon as that lien holder has to do any kind of work, they’re going to just forget it. They might tell you they’ll do it, but they never will. Sometimes they’ll even tell you, “We’re not doing this.” You want to mail it to the lien holder, and when you mail it to them, go the extra step. Put a return envelope in that mailer, that’s what we do. Put a return envelope already filled out with your name and address and a stamp.

Ensuring Smooth Processing
So literally that employee at the lien company, all they have to do is sign it, put it in the envelope, there’s already a stamp, put it out in the mail. They don’t have to do any work. They don’t have to find an envelope, find a stamp, go to the mailroom, anything. As soon as they have to do any kind of work, they’re just going to forget about the whole thing.

Dealing with Complex Cases
Also, if there’s any kind of gray area about that lien—if it’s a charge-off, if it’s a write-off—if they can just pull it up in the system, they type in your VIN number, oh, write-off, sign it, boom, send it. If they have to do research, find documents, that might keep them from giving you your lien release.

Lien and Title: Final Clarification
So remember, a lien and a title are two different things. A lien is a claim against the title. A title is the ownership of the vehicle. Also, a very common misconception—if you borrow money from a bank to buy a car, they’re not the owner of the car, you are the legal owner. They’re just a lien holder, they have a claim against it, but the car is yours. You own it.

Court Process for Lien Release
So as soon as you get that lien released, whether it’s through bankruptcy, charge-off, write-off, signed release, that car is yours. Now what happens if you mail the package to the lien holder and they don’t reply, they don’t respond? Well then, what you can do is file a petition to the court in the county where you reside. It’s called a court-ordered title.

Court-Ordered Title
You’re asking the court to declare you to be the owner of the vehicle free and clear based on a court order. You have to show them, “Look, I reached out to the lien holder in writing, they refused to comply, they didn’t object to it, they didn’t come get the vehicle, they didn’t do anything, so they’re abandoning the vehicle to me. I want you, the court, to make me the owner.” And then they can sign the lien release. If they sign it, it’s as good as gold.

Conclusion: Lien and Title Differences
Those are the differences between the two. Don’t confuse lien and title, two different things. If you have a vehicle that has a lien on the title record, you have to clear that up first before you get a title, even if it’s not your lien, even if it’s somebody else’s.

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