What Happens When You Default On A Title Loan?

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% of title loan customers have their car repossessed annually, you need to consider your options should you fail to pay back your loan 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 not only your mobility but also your productivity. It can also be emotionally devastating for the entire family. If you are under financial stress and you find it a challenge to repay your loan on time, take the following steps to avoid defaulting:


Communicate early
Timely communication is absolutely the most important thing to do 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, the lender may need to confirm that the loan has been compliant with the terms and conditions before your request is granted. Also, some states have laws in place that mandate a lender allows the option 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.


Refinance the loan to avoid a default
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. Of course, in this situation, you still need to pay back the new load as you don’t want to be asking what happens if you don’t back that loan as well.


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 credit, debt management is administered by nonprofit credit counseling companies not keen on financial benefits. 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 Car Title Loans Online

Can a car title loan lender sue me if I miss payments or default entirely?
Similar to what happens with an unsecured loan, a secured lender may sue you to force the issue and get you to pay them. But it’s likely their first step will be to repossess the car and sell it at auction to recover their money. 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. 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. Other states, such as Missouri, have less restrictive laws on what a company can do if they repo your vehicle. Regardless, of whichever state you live in, you should contact the lending representative to work out a payment plan.

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:


  • Repossessiondefaulting 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 to receive credit in the future.
  • 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 type of financial situation. Reach out to our staff to learn how you can avoid a costly default. Contact Highway Title Loans to see how you can get more information about different lending offers that are structured in a way to avoid falling behind or future defaults!




People contact us all time time who can't get current on their auto title loan. Reach out to your direct lender to setup a payment plan.

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