Published: November 2022

Nothing is Impossible

Anyone can tell you: life happens. Unexpected things happen, and sometimes they require money you don’t have right now. Such unforeseen circumstances may force you to sell your car before it is paid in full, and the lien holder simply won’t release the title until your debt is paid in full. However, there are many ways to settle the debt with the lien holder, so you can sell the car to get the money you need to get back on your feet.

With a lien on your vehicle, it is difficult (if not impossible) to sell it. In a few states, it is possible to transfer title to the vehicle while there is a lien, but in the vast majority of states, it is not possible. The owner (you) are responsible for all payments on your car, and if they are not made, the vehicle can be repossessed, which means you are left with no money and no car.

Enforcing the Lien

The most common way to redeem a lien is fairly simple: you pay it off early. You can do this by borrowing from another source of financing, such as using the equity in your home.

The lien holder may also offer you ways to pay off the lien. Once the car is sold, the lien holder can accept full payment for the car from the buyer out of the proceeds of the sale, and then refund the difference to the seller. Alternatively, the buyer can write a cheque to the lien holder for the amount and a cheque to the seller for the difference; however, this method depends on the policies of individual financial institutions.

Reclaiming the Title

Okay, you’ve paid off the lien and now you will receive title to the vehicle and a letter confirming the release of the lien. Always make sure the buyer receives a lien release letter from the lender, if there is a lien on the title the buyer is getting. Do NOT buy the vehicle if you cannot provide a lien release letter.

Although ownership of a vehicle is not normally transferable, a vehicle with an active lien cannot normally be sold. There are ways to buy back a lien if you need to sell your car because of urgent financial problems, without making a big deal about it, so that the lending institution gets the money it is entitled to for the loan.