Securing a personal loan?

I will be lending my friend $5000.00 and we want to do everything legally. She wants to put her car as collateral but i dint know how that will work if she has not finished paying the car loan. I know that one can ask the borrower for a car tittle to secure the loan but in this case she does not have the car tittle. So how can i do this. I was told that i can put a lien on the car but how does that work and is that the best i should do?