When you payoff your car loan, but the bank has the title to it on record, you must wait for the title to actually own it. Once that loan is paid off, the bank or loan holder will transfer the paperwork.
Title Held by Bank
When you enter into an auto loan, the lien holder will hold the title of the car. This means that they technically own the vehicle for the duration of the time you are paying for it. This measure is a safeguard in the event that you no longer make your monthly payments. They then have the right to exercise the repossession clause in the lien agreement and take possession of the vehicle. From here the lender may sell it or auction it off to make up for the loss of money.
Payoff Car Loan and Title
As you get closer to paying off your car loan, you will be anxious to receive the actual title of the vehicle. This means that you will own it free and clear and be able to sell it if you so choose. Once you make that last payment there are several things that will begin to happen. Depending on the state you live in, this will be automatic. However, there might be some instances where you will need to take the initiative and start the process yourself.
One you make that last payment, there is a slight delay in the actual workings. The lien holder will want to make sure that the check clears the bank before sending out any paperwork. When they receive notice that the last payment is clear, and all obligations for the repayment have been completed, the lender notifies the Department of Motor Vehicles (DMV) that you have paid off the loan.
The DMV in your state is the actual issuing agent for titles. The bank or lending institution does not create titles for vehicles. As they receive the notice from the lending agency, this department automatically creates a new title for the vehicle that is in your name. They use the information that the lenders give them about you and the vehicle and automatically create a new one. This new title is then mailed to you within a few weeks.
After you payoff your car loan, there is a slight delay in actually obtaining the title. This is because of the last payment clearing, but also because of the process of obtaining the notice, creating the title and then receiving it in the mail. During this time, you are in a sort of limbo as far your car is concerned. You own it, but not completely. Once you receive the title in your hands, you are free to transfer it in a sale.
This process of obtaining your title after payoff of your car loan is the same throughout the country. However, in some states there are slight differences. To find out what you need to do about your title, contact your local DMV to make sure you know what to expect.