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James Heal
James Heal, Financial Advisor
Category: Finance
Satisfied Customers: 498
Experience:  15 years expertise in all ares of personal finance, including credit cards, mortgages, real estate.
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Need help with Car Title Private Lien Holder Finance Question...

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I am planning on buying a used car using private money borrowed from a friend. I would like to place him as a lien holder on the title, then shortly after, refinance the car to pay him off with the proceeds from the conventional loan. Is this something that people do? I cannot just get a regular loan as I don't have enough time - car puchase is Friday of this week. I am confident that I can secure a refi - but I doubt they see many First and last names as lien holders. The individual could give them some crazy dollar amount as the payoff amount etc...What paperwork would be needed to substantiate the personal loan?

Will a financial institution honor him as a lien holder with a payoff amount if they get a payoff letter that he would fax/email? How would I place him on the title as a lien holder (this may be out of the finance realm of expertise)?

I don't need speculations - just a straight forward answer from someone who has experience in this exact situation.

Great question.


Your going to laugh, but this actually happens quite often and is very easy to put into effect. First, you and your friend need to draw an agreement - nothing elaborate, even hand-written if you want. It will just specify the amount of the loan and any terms, suc has payments, if any. Then you need to sigjn an MV1 form from the DMV and your friend will file these with the DMV and then hold the car as collateral until you pay him off.


And yes, any financial institution will respect his payoff because it's legitimate and they can't be in first lien position unless he releases the lien. If you don't agree with the payoff - refer back to the agreement.


It's an easy transaction and the DMV won't have a problem with it.


Buy the car !

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