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Paying off your car is when you’ve completed your financing obligations with your lender. 

It means you no longer owe any money that you borrowed for the car. 

You can either stick to your original loan terms and make your standard monthly payments, or you may decide to pay off your car early. 

Pay-off Process for Car Loans

The pay-off process for a car is fairly straightforward. 

When you apply for a car loan, part of the agreement will be the loan term or duration. The length of most auto loans generally ranges from 12 to 72 months (in 12 month increments). 

As you’re researching your lending options, one of the things you’ll see is the monthly payment. This is the standard amount you’ll pay every month for the duration of the loan. You can estimate your monthly car payments with this free calculator. 

Learn more about how car loans work here. 

If you stick to the standard monthly payment, you’ll be able to pay off your car at the end of the loan term. 

So, if your monthly payment is $220 and your loan term is 48 months, you’ll pay that amount every month until the term is up, at which point you will have paid off the car. 

However, you may also have the option of paying off your loan faster. 

How to Pay Off Your Car Faster

There are a few main ways to pay off your car earlier. They are:

  • Making higher payments each month. 
  • Making multiple payments per month. 
  • Making a lump sum payment to complete the loan. 

There are a number of benefits of paying off a car loan earlier, such as:

  • Lower the total borrowing cost. 
  • Retaining more money each month. 
  • Lowering your credit utilization ratio. 

However, before you start thinking about paying off your loan early, you should check your financing agreement to make sure there are no pre-payment or early payoff penalties. 

Assuming there are no pre-payment penalties, you’ll also need to make sure that any extra payments you make are going towards the principal of the loan, not the interest or fees. 

If you want to get set up for paying off your car early, you may need to contact your lender to set up the payments correctly. 

Getting the Title After Paying-off an Auto Loan

Once you’ve paid off your car, you’ll be able to receive the title and remove the lienholder. 

When you finance a car, the lender will be listed as a lienholder, or a part with interest in the vehicle, on the certificate of title. In most states, the lender will hold on to the title until the car is paid off. 

Once you’ve paid off your car, your lender will mail you the title, sign the lien release, and provide a lien release letter. 

At that point, you’ll be able to submit the title and lien release to your state DMV in order to remove the lender from the title and get the title in your name only. 

Removing the lien allows you to freely transfer the title yourself. This allows you to sell your car, gift it to a family member, or donate it to charity