What happens once you pay off your car loan?

I have about a year left of payments until my car loan is paid off, but I’ve been thinking about paying it off early. It’s the first car loan I’ve had, and I’m curious: what happens once I pay off my car loan?

Answer
It’s great you’re asking questions and are thinking about paying off your car loan early!
Once you pay off your car loan, you own the vehicle outright, and the lienholder can be removed from the vehicle’s title.
Many states are title-holding, meaning the lender holds onto the title until the loan has been repaid. In these states, the lender usually removes themselves from the title and mails you a free and clear title within a few weeks of your last payment. However, if you live in a non-title-holding state, you should already have possession of the title and will have to contact the DMV to remove the lienholder.
One thing to check before you pay off your loan is if your lender has prepayment penalties. Some lenders will charge you for paying your loan off early, negating the financial benefits. Check your loan contract or contact your lender.
Once you pay off your car loan, you can drop your comprehensive and collision coverage, although it can be beneficial to keep. Regardless of whether or not you drop the full coverage, you should update your car insurance company and compare quotes from multiple insurance companies to ensure you’re getting the best rates.
If you’d rather leave the hard work of gathering quotes to someone else, use Jerry. The Jerry app can collect quotes from more than 50 top insurance companies, like Travelers, Nationwide, and Progressive, in seconds! They even help cancel your old policy once you’ve made your pick.
Jack Walsh
Answered on Dec 01, 2021
Jack is an insurance specialist and writer living in Buffalo, New York. He has a BA from Union College and worked as an insurance agent with Jerry before joining our content team. He enjoys using data and research to break down complex subjects and convey a story. In his spare time, Jack enjoys cycling, cooking, and exploring Buffalo’s beautiful waterfront.
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