1. Security Interest: When you take out a loan to purchase a car, the lender typically requires you to sign a security agreement, which gives them a security interest in the vehicle. This means that the lender has a legal right to the car until the loan is fully repaid.
2. Lien Recording: The lender will file a lien against the car with the appropriate government agency, usually the Department of Motor Vehicles (DMV). This lien is recorded on the vehicle's title or registration, and it becomes a public record.
3. Title Hold: While you may have physical possession of the car title, the lender holds the legal title until the loan is paid off. If you try to sell or transfer the car before satisfying the loan, the lienholder has the right to repossess it.
4. Lien Satisfaction: Once you've paid off the car loan in full, the lender will release the lien and send you the car's clear title. This signifies that you now have full ownership and control over the vehicle.
So, even though you have the car title, the lien remains until the loan is fully repaid. It serves as a legal mechanism to protect the lender's interest in the vehicle and ensure that the loan obligations are met.
