Car title loans allow you to borrow cash when you'd otherwise be turned down because of a poor FICO score or lack of credit history. These loans are great for customers with equity in their vehicle, with the chance to borrow $3,000 or more with a paid-off car or truck as collateral. You don't need excellent credit to qualify; some customers can be approved and funded in less than 24 hours.
The downside of a title loan is that your vehicle's equity secures the loan. While the value of your car allows you to borrow cash when other lenders would turn you down, a lender can repossess the car if you default on the required payments. Even if you miss a payment by a few days or don't pay the total amount due, they can start the repossession process, and you must take action to prevent losing the vehicle.
A repossession is the last thing you want, and because of the risk of losing your vehicle, you should only take out a vehicle-secured loan as a last resort. In this article, we'll discuss how to prevent a repossession from happening, what to do if your car gets repossessed by your lender, and, ultimately, the steps to take if your vehicle is sold at auction.
Prevent A Title Loan Repossession
Lenders will typically repossess your car after you default on a title loan. A default occurs when you miss a payment, and some creditors will start the repossession timeline immediately. Remember that secured lenders or finance companies do not want to take your vehicle immediately, and there are steps you can take to avoid a repossession.
A legitimate loan company will work with you to devise an alternative payment plan or a loan reduction if you can catch up on the payments. We recommend that you contact your lender, explain the situation, and see if they can help you with a repayment plan. However, if they refuse, don't hesitate to get quotes for a refinance or see if any lender will buy out the existing loan.
In some cases, secured lenders will even allow you to add another cosigner to help you get back on track with your payments. Other lenders may allow you to refinance the loan with a lower payoff amount. An example of this type of refinance would be if you defaulted on a title loan and owed $6,000, but worked with the lender to refinance at a new loan amount of $4,500. In this scenario, the lender lowers the amount owed, but they have assurances that you will resume making the monthly payments.
What To Do If A Lender Repossesses My Vehicle
If your lender takes your vehicle, the first step is not to panic. You have time on your side, and the lender often has to wait a few weeks until they can sell the vehicle. During that time, contacting your lender to avoid having the vehicle sold at auction is in your best interest.
Work with your lender to find a solution that allows you to repay the loan in full or add another cosigner to take over the payments. A delayed sale date may give you enough time to find a company to buy out the loan or offer a refinance with lower rates.
Another option is to plead with your lender and explain to them how dire your situation is. We've heard many stories where borrowers had nowhere else to turn and contacted their lenders to see if a solution could be reached. If nothing else, title lenders remember you, and this action could help with refinancing offers later on.
What Happens If My Car Gets Repossessed And Sold At Auction?
If your car is finally sold at a licensed and regulated vehicle auction and it brought in enough money to cover what's owed (plus the lender fees), then you're not responsible for anything more; on top of that, your finance company will send you the balance above and beyond what it took to pay off the loan and any other late or repossession fees.
However, suppose your car goes unsold or brings in less than its value. In that case, the lender will pursue other collection activities to get what they can from repossessing your vehicle. Not all companies take that step, but some may try to sue you to recover their losses.
Don't get overwhelmed by thoughts and threats of title loan repossession; shop for refinance offers or better terms elsewhere. Start with Highway Title Loans, as we have relationships with companies willing to reduce your interest rates and get you current on your monthly payments. Call us at 877-433-5454 to learn how we can help you if you're facing a repossession.
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.