Your lender, or another party, is the legal owner of your car while you are repaying your loan. However, you can obtain the title from your lender and fully own your car after you’ve made the last payment on your loan.
The time it takes to get an updated title after submitting an application and the procedure for obtaining a car title differ slightly depending on the state. But you should get started as soon as you can, as having the title in your name gives you significant ownership rights.
Congratulations! You’ve finally paid off your car loan. This is a major accomplishment and it’s important to celebrate it. But what happens now? What are the next steps you need to take?
Following the repayment of your auto loan, you ought to do the following:
- Check your credit report. It may seem counterintuitive, but credit scores can sometimes decrease when you pay off a loan. Checking your credit reports will give you an idea of what’s going on with your scores, and will also give you the chance to make sure all your car loan information is accurate.
- Get your car title. You just paid off your car and own it outright—now get the paperwork that says so. Your car title is a piece of paper that lists the official owner and any lien holders on your car. Depending on what state you live in, you may already have a title with your name on it. If you do, you live in what’s called a non-title-holding state, which means that your state’s Department of Motor Vehicles issues the title to the vehicle owner and not the lien holder. In this scenario the lien holder is listed on the title, but is not the primary name.
- Look into different insurance coverage options. One advantage of paying off your car loan is that you may be able to get a better rate on your car insurance. First, notify your insurance company that you’ve paid off the loan so they can remove the other lien holder (lender) from your policy.
- Consider saving the extra funds. Another benefit of paying off your loan is that now you can use the money you put toward your car payment for other things. This is a great opportunity to save or invest, as you’ve already proven you can function without the extra cash.
Here are some additional things to keep in mind:
- It’s important to stay on top of your car maintenance. Even though you’ve paid off your loan, you’re still responsible for keeping your car in good condition. This means getting regular oil changes, tune-ups, and other necessary maintenance.
- You may want to consider selling your car. If you’re no longer in need of a car, or if you’re looking to upgrade, you may want to consider selling your car. This can be a great way to get some extra cash, or to put the money towards a new car.
- Enjoy the freedom of not having a car payment! This is a big accomplishment, and you should be proud of yourself.
Here are some additional resources that you may find helpful:
- Experian’s article on what to do after you pay off your car loan: https://www.experian.com/blogs/ask-experian/i-paid-my-car-loan-now-what/
- Reddit thread on what happens after you pay off your car loan: https://www.reddit.com/r/personalfinance/comments/k17hic/what_happens_after_you_pay_off_your_car_loan/
Please note that this is just a general overview of what to do after you pay off your car loan. It’s important to consult with a financial advisor to get specific advice for your situation.
Best regards,
[Your Name]
P. S. Paying off your car loan is a huge accomplishment, so you should be really proud of yourself! I’m very excited for you! Enjoy the freedom of not having a car payment!.
P.P.P.S. I’m really happy for you! This is a big step and you should be proud of yourself.
Title-Holding States
A copy of the title will be provided to you as soon as you take ownership of your car in states where titles are held. This title will have both your name and the name of your lender on it. The lender will hold the title, and you will be given it once the lien is satisfied. You are then responsible for updating the document once you pay off your car loan.
In this case, your lender should send you a lien release once you make your last payment. Again, this can take up to 30 days—if it takes longer, you should contact your lender. To find out where you must deliver this letter, visit the website of your state’s DMV. In certain situations, you may also take it to the local city or town clerk’s office. There, you can use it to apply for an updated title on your car.
How can I check if my car loan is paid off?
To check if your car loan is paid off, you can contact your lender. You can typically check your balance online. The best person to tell you how much you owe on your car and when the title will be transferred to you is your lender.
What happens AFTER you Pay Off Your Car?!
FAQ
What happens after you pay off a car?
Is it smart to fully pay off a car?
Does car insurance go down after car is paid off?
Will my credit score go back up after paying off car?
What happens after you pay off your car insurance?
After you pay off your car, contact your insurance company to let them know. They may ask to see proof of your lien-free title so they can remove the lien holder from your policy. This is essential because if you are in an accident with an insurance payout, you want to ensure the money goes to you instead of the lender.
What happens if I pay off my car loan?
Paying off your car loan can also potentially help improve your credit history. The process for getting the title after you pay off your car loan depends on where you live. In some states, you’ll automatically be sent an updated title. In other states, you’ll be sent a lien release document that you’ll need to take to the DMV.
Who owns your car if you pay off a car loan?
While you are paying off your car loan, your vehicle is legally owned by another party, which is usually your lender. But once you’ve made the final payment on your loan, you can get the title from your lender and become the full owner of your car.
What happens if I pay more than my car loan payment?
Most auto loans use simple interest, so the interest amount you pay monthly is based on the principal amount you still owe. Therefore, when you pay more than your required monthly auto loan payment, you’ll want to ensure the extra funds go toward paying the car loan principal. Doing this reduces the interest you owe and shortens your loan term.