A recent report from the PEW charitable trusts reveals between 6 and 11 percent of title loan consumers have a car repossessed annually. The consequences of car repossession are not only felt immediately but for several months into the future. Apart from inconveniences to your schedules and movement, repossession can impact your credit score and interest rates on future loans. This blog discusses ways to get out of a title loan to avoid having your vehicle reposed.
Tips to Get out of a Car Title Loan Without Giving up your Vehicle
The easiest way to get out of a title loan is to be proactive and pay off your debts regularly. Prioritize setting aside enough money for you to make steady payments to pay off your loan fast. The more money you have to aside for the repayment, the quicker you can pay off your loan and the less interest charged. If you have some extra cash flow at the end of each pay cycle, consider paying more than required.
Contact another lender and consider taking out another loan
Although this may not be an excellent idea, going for another title loan could be a viable option if you desperately need to keep your vehicle but have no other available option to repay the loan. Taking out another title loan to repay an existing loan means you have put off the problem for a few months, affording you enough time to reorganize your finances and accumulate enough funds to make timely repayments. Another option is to consider a personal loan, or low interest installment loan, or even a vehicle registration loan that has better rates and repayment terms than your initial title loan.
Sell a vehicle to pay off your title loan
If taking another online title loan is not a viable option, selling your car could be a perfect alternative. You can use the amount from the sale to pay off your loan and start afresh. Opting for this option allows you to save money on paying interest since you only pay interest for the loan duration. However, if your vehicle is the only mode of transportation, this option ultimately won’t work. This option also won’t work if you’re trying to sell a vehicle that’s attached to pink slip used for this current title loan. You need to sell a car that’s free and clear.
Use credit card cash or get another loan
Most title loans are a few thousand dollars in the loan amount. If you have a credit card with an adequate available credit limit, you can repay the car title loan with a cash advance from your credit. Unfortunately, most credit cards come with a high interest rate charged on cash advanced. They also a revolving loan term that makes it quite challenging to pay off the debt once and for all. However, if you don’t have other options, using your credit card cash could be the only way to save your car from being repossessed.
Apply for a home refinance loan to get cash for an early payoff
If you have equity on your house, you can apply for a refinance loan or a home equity loan and use the loan amount to settle your title loan. A home refinance loan typically comes with several advantages: it has a lower interest rate than most title loans online, a longer repayment term, and a substantial amount of money than credit card cash. However, you will need an excellent credit score and equity established on your home to qualify for this loan. The loan can also take a more extended period of 30 days or more to get approved. However, this is a viable idea, especially if you need to quickly get out of your title loan.
Cash in on your whole life insurance policy to pay off your lender
You should not overlook your whole Life Insurance policy when reviewing your cash assets. Undoubtedly, a whole life insurance policy is a crucial asset to turn to when faced with insurmountable financial challenges. Ideally, a whole life insurance policy provides death benefits similar to those of term life insurance. However, the premium tends to be higher because a portion of it is set aside in an interest-bearing account for you. Some policies allow you to borrow the funds and repay the money at your convenience, making it a great option if you need money urgently to pay your title loan.
Borrow money from friends or family
To most people, asking a friend or family member for financial help is the last thing in their mind. Although it can be embarrassing and humbling, asking for help from close friends and family members is a better option than the consequences of car repossession. Remember, everyone falls into hard times at some point, and you should not shy off from seeking direct help from your family. When considering this option, the rule of thumb is to set up strict repayment terms and offer to pay interest on the loan.
Negotiate new payoff terms for your current title loan
If you are in a situation where you feel you can’t afford to pay off the loan amount, contact the lender immediately and ask for new repayment terms. Most lenders would rather have you pay off your loan under new terms than take away your car away. A renegotiation may include asking the lender for lower interest rates, a longer loan term, lower monthly payment, or a combination of all the options depending on your financial situation. Once you agree on the terms, ensure you have a written agreement signed by both parties.
Default on the title loan & negotiate with your lender
Defaulting your title loan is also an option here. However, it comes with higher costs, including the risk of losing your car and a negative credit score. Even in a situation where the lender takes back your car as compensation for the loan, you may still end up with garnished wages if the car’s value cannot pay for the remaining portion of the loan. However, this could be an option if you have another vehicle.
Get help from the Professionals & Contact Your Car Title Loan Lender!
For the 2 million Americans who borrow against their vehicles annually, car title loans could be the only viable source of fast cash to help them out of an urgent financial need. However, many borrowers fail to pay the money back to the lender leading to the risk of vehicle repossession and damaged credit history. If you have defaulted or are at risk of defaulting on a car title loan, keep in mind the lenders always make good on their auto and title loan repossession warnings.
It is crucial that you carefully explore all options available to determine the best course of action. This starts with you reaching out to your lender’s customer service team to see what they can do to help. The last thing anyone wants is for you to lose the vehicle to a repossession. Your lender will have to pay money to take your car and stage an auction and they’d rather you continue to make monthly payments! If you have any questions or need help to access a title loan, contact Highway Title Loans today,
Janet Patterson is VP of Marketing Communications for Highway Title Loans and the feature editor of its Lending Blog. Janet has worked in the financial service industry for over a decade, with 7 years of experience in the car title loan industry. She previously managed a customer service team that helped and advised consumers on all their lending related questions and concerns.