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The Expert Podcast brings you firsthand narratives from experts across diverse industries, including private investigators, general contractors and builders, insurance agencies, vehicle specialists, lawyers, and many others.
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 that is issued by a government agency. In most states, that agency is called the Department of Motor Vehicles or Motor Vehicle Department. Sometimes, it's called the Department of Transportation, and some states have a different name like Secretary of State.
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 or download a document. It's a physical document, kind of like a $100 bill—you can't print a $100 bill from the internet.
What is a lien? 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, and you borrowed money against that vehicle, either when you purchased it or later on, there will be a section down here for the lien holder where it’ll be filled in with the name of that lien holder. The lien holder puts their name on the title record to protect their interest, to make sure they get paid back, and to ensure 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. 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, or the lender is probably holding onto that paper certificate, and when you pay them the last payment, then they give that to you.
What is the big controversy about liens and lien releases? Here’s what happens. Many times, when a lien is no longer active—whether it's paid off, a charge-off, a write-off, bankruptcy, or some other type of dissolution—the lien holder does not give any notice to the title authority or the Department of Motor Vehicles. 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 the DMV is concerned, there's still a lien on the vehicle. The lender figures, "Well, you have the title; we signed it, so you're good."
Why wouldn’t the lien holder just tell the DMV the lien is cleared? Here's why: it costs money. In order to file a lien release, they have to pay a fee. It might only be $10, $15, or $20, but imagine doing that a thousand times a day for all your customers—it's $20,000 a day, $100,000 a week, or $5 million a year. If they could save that money by not doing lien releases, that's free money in their pocket. Plus, they would need extra employees to do these filings and send them in. They're saving a lot of money, so they figure they send you the title stamped "paid," and you're good.
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, as far as the DMV is concerned, there's still a lien showing. 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.
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, and the other is a magistrate or a judge. 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, email, or any kind of message. Send a 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, and an affidavit—four documents. Send it by mail to the lien holder. Don’t email it, don’t scan it, and don’t text message it. Put it on a piece of paper.
Here's why: that lien holder company, and you've heard us say this before, does not have a team 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. So, if you just call them up and say, "Hey, give me a lien release," they might say, "Yeah, sure, whatever." They have other jobs to do; they’re not going to go find the paperwork. 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. The lien holders are 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, fill them in, and put the VIN number, your name, your address, and all the details so they don’t have to do any work. 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, address, and a stamp, so literally, that employee at the lien company, all they have to do is sign it, put it in the envelope, and there's already a stamp on it. They don't have to do any work, find an envelope, find a stamp, or go to the mailroom. As soon as they have to do any kind of work, they're just going to forget about the whole thing.
Also, if there's any kind of gray area about that lien—if it's a charge-off or a write-off—if they can just pull it up in the system, type in your VIN number, "Oh, write-off, sign it, boom, send it." If they have to do research and find documents, that might keep them from giving you your lien release.
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 is that if you borrow money from a bank to buy a car, they are 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, so as soon as you get that lien released—whether it's through bankruptcy, charge-off, write-off, or a signed release—that car is yours.
Now, what happens if you mail the package to the lien holder and they don't reply or respond? Well, then, you can file a petition to the court in the county where you reside. It's called a 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, and 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." Then, they can sign the lien release. If they sign it, it's as good as gold.
Those are the differences between the two. Don’t confuse lien and title—they are 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.
Use the resources on our website; you have a couple of options. You can use the resources, watch the videos, use the checklist, and do it all yourself for free. We have a title service if you want us to do the paperwork—we can do that. We also have consulting; if you look on the website, you can book a video call, ask questions, or do a chat. There are a lot of ways you can do consultation with a certified title expert to get the answers to your difficult title questions.
If you need more information, click on the website; you'll find it all right there. If you found this video helpful, be sure to click on other videos on our channel to see if there's further information that could give you more insight into resolving your particular situation.