Approximately 1% of the American adult population borrow against their cars annually. That means well over a million people will use the equity in their vehicle as security for a loan and that goes to show how popular title loans have become for applicants who otherwise would not get approved because of their poor credit score.
But with the revelation that up to 11% of title loan customers have their car repossessed annually, perhaps it’s best to consider other options if they need to borrow cash. A repossession is of course the end result of someone defaulting on their payments and you never want to be a situation where a title loan company takes your vehicle. This article covers the consequences of defaulting and the steps to avoid loan default.
Steps To Take To Avoid Title Loan Default
Defaulting on your title loan can lead to repossession of your car, affecting your mobility and productivity.
Communicate with your lender
Timely communication is the most important way to avoid defaulting on a car title loan. If you are experiencing financial challenges and you foresee the inability to make your loan repayments contact your account manager as soon as possible. When you let the lender in on your situation, they may find a temporary solution that considers both parties’ interests and conforms to your state’s title lending regulations. Repossession is a last resort move for most auto lenders because a car’s value depreciates with time. Most times, lenders are ready to work with borrowers to evaluate the terms of a car loan.
Ask for a payment extension
An extension allows you more time to make your loan payment. If you have been making regular interest payments, an extension will not be an issue where appropriate. By extending the length of the loan, you lower your monthly payments and thus have more money available each month. However, before granting your request, the lender must confirm that the loan complies with the terms and conditions.
Make partial payments
Making partial payments demonstrates a measure of good faith in the face of the challenges you are going through.
Swap out the car
If you don’t have enough cash available to repay your online title loan, it may make sense to sell the car and generate cash. Although selling could be difficult when you don’t have a clean title, it is still possible. You can sell the car, downgrade to a less expensive option, and save hundreds or thousands in interest and fees.
Refinance the loan to avoid a default
Another way to avoid default on your loan is by refinancing the current terms and payment amounts. Although it may not solve the main problem, a fixed-rate loan from a bank or credit union can be more economical than rolling over the payments. Besides, getting rid of your title loan with another loan allows you to regain your title. Of course, in this situation, you still need to pay back the new load as you don’t want to ask what happens if you don’t back that loan. Consider refinancing your loan with Highway Title Loans for a more manageable APR and payoff amount!
Try debt management
If you need help with your finances and debt, a nonprofit agency can negotiate with your lenders and place you on a Debt Management Program that fits your budget. Unlike the debt settlements that can significantly damage your credit, debt management is administered by nonprofit credit counseling companies that are not keen on financial benefits.
Common Questions About Defaulting on Car Title Loans Online
Can a car title loan lender sue me if I miss payments or default entirely?
In some states like Texas, you have rights when a lender takes your vehicle and any legitimate company will need to follow applicable title loan repossession laws. If you fall behind on a title loan in TX, you’re entitled to due process and any amount above what your car sells for at auction. Other states, such as Missouri, have less restrictive laws on what a company can do if they repo your vehicle.
What happens if I default on my title loan
Defaulting on a loan happens when you fail to make repayment for a certain period agreed upon with your lender. When a loan defaults, it is often forwarded to a debt collection agency that will contact you to recover the unpaid funds. Defaulting on a title loan may also lead to the following consequences:
- Repossession– defaulting on a title loan may force the lender or car dealer to seize or repossess the car to pay for the outstanding debt.
- Reduction of credit score-Additionally, defaulting on a loan can reduce your credit score and impact your eligibility for future credit.
- Fees- A title pawn company may also impose several fees that cover the attorneys, towing, and storage costs. These fees are regulated and limited in many states, but they will still be high and add to the stress of getting back to current on the payments.
Need Money So You Don’t Default On A Title Loan? Contact Us
Our friendly and helpful loan agents are ready to help you get cash for any financial situation. Contact our staff to learn how to avoid a costly default. Contact Highway Title Loans to see how you can get more information about different lending offers that are structured to avoid falling behind or future defaults!
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.