A lienholder on a vehicle is a person, company, or financial institution that holds a legal claim to the vehicle until the loan for the vehicle is paid off. The lienholder can be a bank, a private individual, or some other financial institution. When a vehicle is financed, the lienholders name appears on both the cars title and the car insurance policy until the loan is fully repaid. The lienholder typically holds the title for the duration of the loan payment period, and in some states, the lienholders name is printed on the title to protect their financial interests. If the borrower fails to pay off the loan, the lienholder has the legal right to repossess the vehicle.

Lienholders can require the borrower to purchase certain car insurance coverages to help protect their investment if the vehicle is damaged or destroyed. Comprehensive coverage and collision coverage are the two most likely types of insurance that the lienholder may require. Once the loan is paid off, the lienholder releases the lien and signs the title over to the borrower.

It is important to note that a lienholder can be listed on the car title and car insurance policy even if the vehicle is not financed. For example, if a person takes out a loan and uses their car as collateral, the lender may place a lien on the car until the loan is paid off.