There are more borrowers than you would think, that take out a title loan and fail to make their payments. A survey done by the Pew Charitable Trusts reveals over 2 million people, or approximately 1 percent of the American adult population, borrow against their cars annually. Car title loans can be a viable option when one doesn’t have a high enough credit score to get a loan the more conventional way. It is also an ideal solution when facing emergencies and unplanned financial obligations.
But with the revelation that up to 11 percent of title loan customers have their car repossessed annually, you need to consider your options should you fail to pay back your title loan. This article covers the consequences of defaulting and 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 not only your mobility but also your productivity. It can also be emotionally devastating for the entire family. If you are in financial stress and you find it a challenge to repay your loan on time, take the following steps to avoid defaulting:
Timely communication is absolutely the most important thing to do. 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, the lenders are ready to work with borrowers to evaluate the terms of a car loan.
Ask for 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, the lender may need to confirm that the loan has been compliant with the terms and conditions throughout before your request is granted. Also, some states have laws in place that mandate a lender allows the options of payment extensions if the loan recently fell behind.
Make partial payments
You can also opt to make partial payments instead of full payments. You can negotiate with the lender, modify your agreement, and set up a payment plan to get you back on track. 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 and downgrade to a less expensive option and save hundreds or thousands in interest and fees.
Another way to avoid default on your loan is by replacing it with a different loan. Although it may not solve the main problem, a fixed-rate loan from a bank or credit union can be more economical compared to rolling over the payments. Besides, getting rid of your title loan with another loan allows you to get your title back.
Try debt management
If you need help with your finances and debt situation, 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 credits, debt management is administered by nonprofit credit counseling companies not keen on financial benefits. The credit counselors can also provide tips on how to improve your money management skills and come up with a functional budget.
Common Questions About Defaulting on Title Loans Online
Can a title loan lender sue me?
The title loan company may not sue you to repay the loan unless a fraud issue is raised. The only thing the auto title lender can do is repossess the car and sell it to recover their money. In some states like Texas, you have rights when a lender repossess your vehicle. You’re entitled to due process and any amount above what your car sells for at auction If you fall behind on a texas title loan.
What does it mean to default, and how would I know when it happens?
Defaulting on a loan happens when you fail to make repayment for a certain period agreed upon with your lender. In most instances, when a loan defaults, it is 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 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 to receive credit in the future.
- Fees- The title loan company may also impose several fees that cover the attorneys, towing, and storage costs.
Need A Quick Loan To Cover Your Emergencies? Contact Highway Title Loans Today
We are car title lending experts that make it easy to get cash for desperate moments. All it takes to qualify for a title loan online with us is to fill out our application and answer a few questions from our underwriting team. With us, you can rest assured you will keep driving your vehicle for the life of the loan! If you have any questions about our title loans, contact us, and we’ll walk you through the process.
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.