Generally, to get car title loan most title lenders require a lien free title to make the loan. If you are still making payments on a vehicle, then this means your title has a lien. The lienholder is the finance company you are making your payments to. There are, however, a couple of ways to get a title loan if you have an existing lien on the vehicle. These are a bit more difficult than a typical title loan and may take longer depending on the specifics of your vehicle and existing loan.
Car Title Loans still making Payments
The first way to get a car title loan while still making payments is to satisfy the existing loan and have the lien removed. The fastest and easiest way to accomplish this would be to borrow the money needed to satisfy the existing loan from a friend or relative, and pay them back as soon as you title loan is funded. This is not an option for everyone, so we’ll go over the next two methods.
Removing Liens by Paying off Loans
In some cases, title lenders will pay off your existing loan, have the lien removed, and add their lien to your title. This depends on several factors including what state you live in, how much you still owe, and the current value of your vehicle.
Second Lien Title Loans
A second lien is a lien added to a title with an existing lien. It is not common for title loan companies to add a lien to a title as the second lienholder. Most of the time, the first lienholder needs to grant permission for the title lender to be added as the second lienholder. You can probably guess how many banks and finance companies will allow this.
Second lien title loans, by name, are a bit misleading. Most title loan companies that make loans to customers with existing liens will either satisfy the lien using proceeds from your loan, or not record their lien. They call the loans second lien title loans, but do not necessary record the second lien. This is not permitted in every state.
Read the Loan Agreement
As with any title loan, read the loan agreement in full before singing it. Make sure you understand how the lender plans on addressing the existing lien and how it affects your loan proceeds. The last thing you want is to pay interest on two loans at the same time.
Cleanest way to get a Title Loan with a Lien
We have already mentioned it, but it is worth mentioning again. The cleanest way to get a title loan is satisfying the existing lien first.
Qualifying for a Second Lien Title Loan
To be able to apply for, and be approved for, a car title loan while still making payments on another loan you will need to meet some minimum qualifications. First, you will need to meet the requirements for a title loan (obviously) including being 18 years of age, having a valid ID, insurance, etc.
Beyond the regular title loan requirements you must have enough equity in your vehicle to both cover your existing lien and support the amount you want to borrow for your title loan.
Getting a Car Title Loan while still making Payments – Examples
If you have an existing lien and find a lender willing to satisfy the existing lien, here are a few examples of what your loan would look like. A portion of the loan would go towards paying off your existing car loan. The remainder would go to you as the borrower. This means your existing car payment would be gone, and replaced with a payment to the title lender.
|Car Value||Existing Loan Amount||Title Loan Amount||Net Proceeds|
How to get a Lien Released
If you recently paid off your existing car loan your lender should send you a free and clear title. Sometimes this process can get delayed. This delay may come at a time when you need your title for a title loan. Contact your lender and find out where they are in the process of releasing your lien and sending you your title. If you’re still having problems, these links may be helpful:
For other states contact the DMV and follow their recommended process. Make sure to keep of the final payment to your lender to show that you satisfied your financial obligations.
It is possible to get a title loan while still making payments on a car loan. This is only recommended if the amount owed on the existing car loan is very small. Car title loans generally have much higher rates than regular car loans. So rolling your existing car loan into a title loan balance will be expensive. To get an idea of how much the title loan will cost use our title loan calculator.