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Is a car loan considered a lien?

I’m a little confused. I have a car loan, but I keep hearing my friends talk about their car liens. Are these the same thing?

avatar
Lauren Smith · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
This is a common area of confusion—but car loans and liens are not the same thing. Usually, people get a lien on a car because of their
car loan
.
Essentially, the lender who gives you the money for your car loan will file some additional documentation with the government to lay claim to your car and title. This ensures that they will recoup their losses no matter what.
Either you’ll pay off the entire loan over time (maybe with a refinance along the way), or the lender will take possession of your car if you default.
In this process, the
lien
 is the legal documentation that the lender has given you outlining your agreement to pay back your debt. This gives them the right to take legal action against you if you don’t pay back your loan.
If you’re looking to free up some extra cash to make paying off your car loan easier, use
Jerry
 to compare dozens of competitive car insurance quotes and find a cheaper rate without sacrificing the coverage you need.
MORE:
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