Congratulations! Here’s what to do next.
Last month, I (finally) paid off my car. This was my first financed vehicle and I had no idea what I was supposed to do next. Within a few days of paying off my car, I received my title in the mail from my bank, or lienholder. Along with the title was a letter with some pretty cryptic text at the bottom about DMV and penalties. I didn’t know what was going on. So I gave my lienholder the call, gathered some more information and started the process of officially putting my vehicle in my name. Let me save you a little time (and money!) by sharing my personal experience.
Here are three crucial steps you need to take.
Note: If you are still paying off your car, call your lienholder and ask if you can refinance the loan. I did this a year ago after paying my loan on time every month. My interest rate went from 3.5% to 2.74%. It took 10 minutes. Make the call.
Call Your Insurance Provider
There are two things you’ll need to discuss: removing the lien from your policy and lowering your rate. The lien part is easy—just tell them you have recently paid off your car. As for the policy, ask if they will drop your rate. My car loan required full coverage insurance. I assessed what my car is worth now and if it was still worth it to have full coverage insurance. I decided to drop the full coverage and switch to liability only. My policy went from ~$94 a month to ~$75. That’s almost $20 extra saved each month, or $240 a year. Again, this was my personal choice. If you like the security of full coverage, keep it.
Go to DMV
Ugh. I know. To avoid the headache, read about how you remove a lien from your vehicle, and fill out an Application for Title and Registration ahead of time and bring it with you. Also, be prepared to pay. It cost $93. If you wait longer than 30 days, you can be charged additional fees. Save money by not procrastinating this step.
Save the Extra $$
Between my car payment ($200/mo.) and what I saved on insurance ($20/mo.), I now have a nice chunk of extra cash staying in my bank account every month. Instead of spending it, or letting it just sit in a regular savings account, consider adjusting your budget in this way:
- Increase your monthly payments on existing debt
- Put this extra cash into your 401k/IRA contribution
- Open a high yield savings account
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