What is a Clear Title?

If you have the clear title to a piece of property or personal asset, it means you own it outright. For instance, if you financed your car, when you make your final payment, you gain possession of the vehicle's title. The title, in a sense, is proof of ownership. A clear title means you own the piece of property free and clear of encumbrances, i.e., with no strings attached. Having the clear title to any type of asset is a positive financial step, because it means you have paid in full and own whatever item is attached to the title.

A clear title, also referred to as a "clean title," "good title," or "free and clear title," is a title free of any type of lien or levy from outside parties or creditors. If you have the clear title to your vehicle, you are the sole undisputed owner and no one else can claim legal ownership. When it comes to real estate transactions, a clear title is a necessary component.

If the title of the property has a blemish, such as an unresolved building code violation, any and all blemishes must be rectified before moving forward with the transaction. The title of a property cannot be issued if it has any claims or liens against it, so you must do a thorough search beforehand or hire a title company to do a search on your behalf.

Getting the Title to your Vehicle

Let's say you recently paid off the lien holder on your car loan and you were sent the necessary paperwork stating you have fully paid off the loan. Next, you will need to obtain possession of the title, but how does that process work? Well, it varies depending on the state where you live. In general, the lien-holder must notify your state's Department of Motor Vehicles (DMV). Notification can occur either electronically or by submitting paperwork stating you have paid off your loan.

Don't expect to get your title immediately after you have made your final payment, because the lien holder will want to make sure your final check clears. Plus, it takes some time to prepare the required paperwork for the state. Once the DMV is notified, your title will either be automatically mailed to you or you will need to go to the office to pick it up in person. To learn the specific procedure in your state, visit your state's motor vehicles website.

Once you have the title to a piece of property or asset in your possession, you will want to keep it in a safe, waterproof place. A title is a legal document that needs to be well cared for in case your ownership status is ever called into question in the future. Many people choose to keep their title(s) in a safety deposit box at the bank or in a home safe. Either way, make sure these documents are under lock and key.

Uses of a Lien-Free Title

Some people receive a clear title and assume every cost associated with their asset is taken care of. However, when it comes to your car title, you will still need to make payments such as the annual registration fee and insurance payments. In other words, although you own your vehicle, it doesn't mean you can stop putting money toward various car expenses.

Down the line, if you find yourself in a sticky financial situation, you can even use your clear title to secure car title loans. Car title loans are based on the value of your vehicle, so a lender temporarily holds onto your title as collateral. Many people apply for a title loan if they need money as quickly as possible and do not have a stellar credit score, because a credit check is not required. Once you have paid your loan in full, the lender will return your title. It is important to note that you can continue driving your car throughout the duration of your car title loan, because you do not need the title in your possession in order to operate the vehicle.

In any case, if you have a clear title, whether it's for your car or a piece of property, you should give yourself a pat on the back. The equity in the assets you own are beneficial when it comes to your overall financial profile, so proof that you own an item outright is worthy of praise and admiration. If you have been making regular payments for what seems like forever, it will all pay off when you finally see your name on the clear title.