Vehicle Title Loan Laws in Texasby Robert Schrader
When you sign a loan agreement to make monthly payments on a vehicle, you don't technically own it--despite the fact it is in your possession. A "lien" is a legal addendum the owner of the car (usually a bank) attaches to the car's title, establishing its right to reclaim the vehicle under certain circumstances. Texas law establishes several regulations for the issuance of titles for loaned vehicles.
Section 501.027 of the Texas Transportation code governs the issuance of titles. With regard to loaned vehicles, it states that the "department shall send the certificate by first class mail to the lien holder as disclosed on the application." Your lender will apply for the title on your behalf to ensure the issuing authority has record of the lien.
Sale of Vehicle
Section 501.071 of the law mandates that all requests for sale "include a statement that the signer is the owner of the vehicle and that there are no liens on the vehicle except as shown on the certificate of title or as fully described in the statement." Since you don't truly "own" the car for which you've taken a loan, you can't fulfill both of these obligations without a bit of work. The easiest way around this is to become the owner. To do this, you have your buyer pay in cash. You then pay the rest of what you owe to your lender, at which point the lender will transfer the title to you. Once that is complete, you can sign the title over to the buyer.
Moving into Texas
If you are moving into the state of Texas, you will need to apply for a Texas title for your vehicle in order to obtain new license plates and registration. Similar to what would happen if you tried to sell your car, you will be prohibited from applying for a new title unless you can prove that you own the car and that it is free of any liens. In other words, you will need to call your lender and inform them you are moving to Texas so they can arrange a new title on your behalf.
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