How Are Title Loans Paid Back?

Title loans are a type of secured installment loan that require the use of the borrower’s vehicle title as collateral. If you’re interested in inquiring for a title loan, you may wonder how car title loans are paid back, and how much time you’ll have to do so.

Keep reading to learn more about how car title loans are obtained and paid, before deciding about applying for one.

How Are Title Loans Obtained?

Title loans offer flexible qualification requirements for borrowers, which allows individuals with low or unestablished credit to confidently apply.¹ There are two main qualifying factors: the vehicle and the borrower’s ability to pay back the loan.

Title loans are typically flexible with the types of cars that are accepted as collateral. As long as the car has enough equity, it may qualify for a loan. One quick and easy way to check if the car has enough value is to use an online title loan calculator.

Income is also very important for title loan eligibility. As long as the potential borrower receives consistent income and the loan can be paid back without difficulty, the income may be sufficient for loan approval.¹

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How Are Title Loans Paid Back?

If you are approved for an auto title loan, it’s important that you plan how the loan is going to be paid back before you sign the loan contract. Generally speaking, there are two different types of title loans – which one is available depends on the state you live in, and the loan provider you choose to work with:

• Short-term title loans: Short term title loans are available in several states. They typically need to repaid in-full within 30 or 60 days, including interest and fees.
• Installment loans: Installment loans have longer terms ranging from a few months to several years. These loans are repaid over time, typically through equal monthly payments. Installment title loans are also available in several states, including Arizona, Texas and Wisconsin.

Title loans serviced by LoanMart are generally installment loans. Your loan payment will be due once a month as disclosed in your title loan contract. Having predictable, regularly scheduled monthly payments can help making title loans serviced by LoanMart manageable and affordable!⁵

With car title loans serviced by LoanMart, you have many convenient options for making your title loan payments:

• Pay online through your title loan account
• Pay over the phone using a payment card
• Set up a one-time payment or recurring payments from your bank account
• Make your payment at a participating money transfer location

Benefits of Paying Back Car Title Loans on Time

When title loans are paid back in a timely manner, you may benefit in several ways:⁵

• Credit score improvement: If your title lender or loan servicer reports payments to the credit bureaus, your credit score may benefit from showing the on-time payments in your credit history
• Minimizing finance charges: Making on-time payments can help you minimize the interest and fees that are assessed on your loan. Late payments will generally result in higher interest charges, and can also result in late fees being added to your account.
• Financial freedom: Paying back your auto title loan on time can enhance your financial freedom – the sooner your loan is satisfied, the sooner you won’t need to account for the loan payments in your monthly budget anymore! Upon paying off the loan, you’ll also receive back your vehicle title free and clear. Having full ownership of your vehicle title can allow you to make financial decisions, which could include changing your insurance coverage, selling you vehicle, or using it as collateral for another loan in the future.

How Much is Owed when Paying Back Car Title Loans?

The exact amount you are required to pay depends on several factors. The key ones are:

• The amount you borrowed
• The interest rate
• Any fees you are charged
• How long it takes you to pay back the loan

All else being equal, the higher that each of these individual factors is, the more you will be required to pay back. Once you are approved for a title loan, be sure to carefully review the title loan agreement, which should clearly disclose the total payments you’ll owe, assuming that you are paying back the loan exactly as agreed.⁵

Can Auto Title Loans be Paid Back Early?

If you have an auto title loan, you might wonder if it can be paid back early. Usually, the answer is “Yes”, but it’s worthwhile to check the fine print in your title loan agreement!

Depending on the terms and conditions of your vehicle-secured loan, you could be charged penalty fees for paying it back early. When a loan is paid back earlier than agreed upon, the lender loses collects less interest. For that reason, some title loan providers charge prepayment penalties.

Title loans serviced by LoanMart do not have prepayment penalty fees. That means you can pay off your title loan early, save on interest while doing so, and get back your title much quicker! Whether it’s paying off your entire loan early, or adding a few dollars to your monthly payment whenever you can, borrowers are encouraged to pay early, often and more in order to minimize the finance charges while borrowing against their car or truck.

Paying Back Title Loans after Bankruptcy

Declaring bankruptcy may help settle your debt and stop phone calls and letters from debt collectors. Whether you file for Chapter 7 or 13 bankruptcy, this last resort option may help you get a fresh start. But, it’s a fresh start that can come with a lot of consequences. One of the biggest is trying to apply for loans after you have declared bankruptcy.

Whether you filed Chapter 7 to discharge debts, or filed for Chapter 13 to use a 3-5 year plan to pay off your debts, the fact that you filed for bankruptcy can affect you long after your debts have been actually paid. If you file for bankruptcy while you have an open auto title loan, the terms of your title loan may be changed, which could result in modifications to your interest rate, loan term and monthly payment.

What is Defaulting on a Car Title Loan?

When you sign a title loan agreement, you’ll agree to use your car as collateral to get the loan. You’ll also agree to several borrower responsibilities, the main one being that you agree to make your loan payments as outlined in the agreement. If you start to miss your monthly payments and continue to miss them without any communication to your lender, the delinquency can result in car title loan default. A car title loan default is the failure to repay a loan according to the terms agreed upon in your contract.

How Many Title Loan Payments Are Missed to Default?

Rules regarding defaulting and repossession can vary depending on the state you live in. The title loan  agreement will say when the missed payments are considered a loan default, and what other events can be considered a default (for example, letting required car insurance coverage lapse).

What Happens When You Default on Car Title Loans?

Because you are using your vehicle’s title as collateral for your car title loan, a lender is permitted to seize the vehicle once your loan is in default. Depending on your state of residence, the lender or loan servicer may be required to send you a written notice, before attempting to recover the vehicle. It’s best for both borrowers and lenders to avoid title loan repossession. The repossession process is expensive, and vehicles that are sold after repossession oftentimes don’t cover the remaining loan amount due to the fees involved or due to lack of demand at the vehicle auction.

Therefore, if you are a title loan borrower who is experiencing difficulties with upcoming loan payments, be sure to contact your lender or loan servicer to discuss your options!

What Happens if Your Car is Repossessed?

Once the borrower’s vehicle has been repossessed, the car title loan lender can choose to sell the car at an auction. The sale proceeds will go towards the remaining balance of the loan. If the sale amount is more than the remaining loan balance, the lender has to give the surplus back to the borrower that defaulted on the loan. If the sale amount does not cover the remaining loan balance, the borrower may still owe the remaining loan amount. If there is any property within the vehicle, the lender must return it to the borrower.

Title loans serviced by LoanMart are designed so that repossession is the very last resort. We believe it is more beneficial for both customer and company to avoid this outcome. That’s why LoanMart provides customers with the financial education resources to understand what happens when you default. We encourage calls from customers who are struggling with payments, or from customers of other lenders who want to refinance their title loan to avoid default.

Conclusion About Title Loan Repayment

Now that you know how auto title loans are paid back, you can make an informed decision if borrowing against your vehicle can be right for you! The title loan approval process was made for convenience, so only a few steps are necessary. Take a look at how the process usually unfolds:

• Application: Applying for a title loan is quick and easy, and can potentially be done in 5 minutes or less.¹ Apply online or call us at 855-422-7412 to get started!
• Required Documents: Once approved, you can proceed with sending in your documents. Generally, you will be asked to provide documents that verify your identity, address, income, and car ownership.
• Finalize Loan: Once your documents have been verified, you can choose how you’d like to receive your funds, sign your loan contract, and finalize your loan by sending in your vehicle title.¹