If a Car Has a Loan, Can You Add Someone to the Title?

A car's title dictates ownership of the vehicle. The name that appears there controls what happens to the car – they can sell it, refinance it or even just give it away. But states have their own rules about who can hold the title, and how and if they can add a co-owner.

The procedure for adding a name to a car title is usually pretty basic nonetheless – unless there's a loan against the vehicle. In this case, you might not actually hold title to the car in the first place, so you can't unilaterally add someone else's name. Lenders often hold title when there's a lien against a vehicle, even if the registration is in your name.

Your first step should be to reach out to your lender if there's a loan against your car. In fact, most states require this. They won't add anyone to a title held by a lienholder without that lienholder's express consent and approval.

This makes sense because that lien gives them ownership of the car – they can sell it to recoup what they lent you to buy it if you default on payments. Titles are directly issued to lienholders, not the borrowers, in many states, such as New Jersey and Maine.

Some lienholders will let you add an additional party to the title, but others won't. There's no universal rule, so contact your lender to find out where you stand.

You might consider paying off the loan or lien if possible if your lender won't agree to add a name to the title. This removes the lien so it's no longer an issue.

Most lenders will confirm with you in writing that the loan has been satisfied, and they'll tell you in that letter what you should do in your state to remove their name from the title. Check with your department of motor vehicles if you don't receive instructions as to how to go about it. You can add anyone to the title after the lienholder is removed.

You might also ask your lender about refinancing the vehicle to add your potential co-owner to the loan as well. This would streamline the transfer of title into both names when the loan is paid off. You're not only giving the individual shared ownership of your car when the lien is satisfied, but responsibility for paying the loan against the car as well.

This is typically only an option, however, if the individual's credit is at least as good as yours, if not better.

Of course, there are advantages and disadvantages to the outcome of going through this process, however you achieve that second name on your title.

You might get a better loan rate if you refinance in both names and your co-borrower has pretty good credit. On the flip side, you've now given unilateral control over the vehicle to this other person as well when both your names appear on the title. There will be two names on the car's registration as well, which can create liability issues in the event of an accident or serious traffic violation.

Selling the car doesn't require the consent of both parties on the title in many states. Your co-owner can turn the keys over to someone else without your agreement after the loan is paid off. You can enter into a written agreement between you prohibiting this, but you'd have to go to court to enforce it.

You're not done when you've changed the title. Don't neglect to let your insurance company know about the change as well. In fact, some states won't add an individual to a car title unless and until that second owner is covered under the vehicle's insurance policy and the proof is presented that this is the case.