When you pay off a car loan, what happens?
After many years and a few refinance loans, I’m finally one payment away from paying off my car loan. However, I’m curious, when you pay off a car loan, what happens?
Congratulations; it sounds like you’ve had quite a journey paying off your car loan, so you must be excited to have the end in sight!
When you pay off a car loan, you gain full ownership of the vehicle, and the lienholder can be removed from the title. You are also no longer required to carry comprehensive and collision coverage, although they are both smart to have.
Depending on your state and lender, the process of getting your title is as simple as getting it in the mail a few weeks later or making a trip to the DMV. If you live in a title-holding state, meaning the lender has possession of the title, they will send you your title within a few weeks of you making the final payment. If you live in a non-title-holding state, you should already have the title and will have to visit the DMV to have the lienholder removed.
Whether or not you decide to keep the comprehensive and collision coverage, you should notify your car insurance company that you no longer have a lienholder. After updating your insurer, your rate will likely be adjusted, and you should take the time to compare quotes from multiple companies to ensure you aren’t overpaying for your coverage.
If you want to take the hassle out of comparing quotes, download Jerry, an insurance comparison app that shops for low prices with over 50 different insurance companies, including Nationwide, Allstate, and Travelers, for free. You will get quotes in seconds, can make changes at any time, and if you ever have any questions, agents are just a text away. They even help cancel your old policy once you’ve made your pick!
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