Is it mandatory to mortgage the vehicle title when buying a car with a loan?
2 Answers
When purchasing a car with a loan, it is mandatory to mortgage the vehicle title. After the loan is fully repaid, the owner must also complete the deregistration of the mortgage. According to regulations, if the owner of a motor vehicle uses the vehicle as collateral, they must apply for mortgage registration at the local vehicle management office. When the mortgage is extinguished, they must apply for the cancellation of the mortgage registration at the same office. The vehicle title, also known as the vehicle registration certificate, is the legal proof of vehicle ownership. It is kept by the vehicle owner and not carried with the vehicle. This document is required for any vehicle-related procedures such as transfers or registrations, and it records the vehicle's relevant information, serving as the vehicle's equivalent of a household registration booklet.
When financing a car purchase, it is standard industry practice to mortgage the vehicle registration certificate to the lending institution. As a seasoned salesperson with years of experience in the automotive industry, I have assisted hundreds of clients with auto loan applications. Nearly every bank or financial institution requires the vehicle title to be submitted for filing before disbursing the loan. The reason is straightforward: during the loan term, the car serves as collateral, acting as security for the bank’s risk in lending you money. Without this mortgage, how can the lender safeguard its interests? If the car owner were to sell the vehicle privately or take out a second mortgage, the bank could suffer significant losses. Typically, after the loan is fully repaid, you can bring the loan settlement certificate to the DMV to complete the release of lien procedure. The entire process usually takes about a week, so remember to call ahead to schedule an appointment and avoid unnecessary trips.
