A lienholder on a car title is a lender that has a legal claim on the vehicle until the loan is fully paid off. When a car is financed, the lienholders name is typically printed on the title to protect their financial interests. The lien allows the lender to repossess the car if the borrower stops making payments. A lienholder can be a bank, credit union, or other financial institution. The lienholder is considered the legal owner of the vehicle until the loan is paid off, and they hold the cars title. If a car title has a lien, it means that the lienholder has a legal claim to the car.
When a lien has been satisfied, the lender must submit an electronic release of lien, and the lienholder is then removed from the record. The lienholder can also request a printed title when a paper title is necessary for a record with an active lien.
Lienholders can require the borrower to purchase certain car insurance coverages to help protect their investment if the car is damaged or destroyed. If a car is financed, the lienholder will probably require that they are listed on the car insurance policy. When the loan is paid off, the lender can legally sign over the title to the borrower or submit paperwork to the states department of motor vehicles to release the lien. The borrower can then provide proof of the lien release to their insurance company to remove the lienholders name from the policy.