In the context of car buying, the lienholder is typically a financial institution, such as a bank or credit union, that lends money to a buyer to purchase a vehicle. When a buyer finances a car, they agree to repay the loan amount, plus interest, over a specified period. As part of the loan agreement, the lienholder registers a lien on the vehicle's title with the local motor vehicle department. This lien gives the lienholder a legal interest in the car as collateral for the loan.
If the buyer fails to make the required payments, the lienholder has the right to repossess the vehicle and sell it to satisfy the outstanding loan balance.
In some cases, the dealer from whom the vehicle is purchased may act as the lienholder and hold the title until the loan is paid off.
Once the loan is fully paid off, the lienholder releases the lien on the car's title and sends the title to the buyer.
