Getting the Title to Your Car When You Have an Unsecured Loan

It’s a brave new world of auto loans out there with many customer-friendly features that traditional banks lack. Some of the new student loan companies for example will pause your payments if you’re out of work. How nice is that?

So when I was researching loans for a used car we wanted to buy, I looked at all my options. The Simple Dollar’s review of auto loans was especially helpful. We ended up with a loan from LightStream (aka SunTrust) because they gave us a great rate and would allow us to buy from a private seller which saved us a few thousand dollars.

Oddly enough we didn’t realize until after we registered the car that the bank gave us an unsecured loan. Normally a car loan is secured by the car, so if you don’t pay the loan the bank takes back (repossess) the car. But because our credit history and salary history is very good, they gave us an unsecured loan. Why? I don’t know, maybe it’s simpler and less expensive for them.

What this also means is they don’t have a lien on the title. And when we registered the car at our local New Jersey motor vehicles office they didn’t believe this because 99.99% of car loans are secured. The solution? We had to get a notarized letter from the bank to prove it the loan was unsecured and there was no lien on the title. Four DMV trips later we have the title!