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There are countless options for borrowing money in the financial lending industry. All of these options serve different purposes while all contain both pros and cons. When a person uses an automobile they own as collateral to borrow money, they’re getting what’s called a “Car Title Loan”.

People take out title loans on cars for many reasons. There might be a medical emergency. There might be some unpaid bills. One thing that most reasons have in common is that they are time sensitive. Car Title Loans are often a convenient way to get a check quickly, and depending on the situation, it is possible to get a Car Title Loan even when someone has a poor credit score. This is able to work because lenders take more than just credit scores into account when deciding whether to approve a loan. The loan is mostly based on the current collateral value found in the vehicle and the ability of the potential borrower to repay the loan in monthly installments.

But many people ask, and rightly so, what happens if a borrower defaults on a title loan on their car? It is very important to learn all that you can about the ins-and-outs of a financial decision before you make it.

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What is a Default?

Defaults occur when a borrower fails to adhere to the terms previously agreed upon between them and the lender of the loan. Common examples are missing a payment, not paying the agreed amount, or doing something the loan agreement says the borrower can’t do. After a default takes place, the lender will attempt to contact the borrower to discuss whether the default can be remedied in a simple and efficient way before needing to find a solution elsewhere.

What Happens if a Borrower Defaults on their Auto Title Loan?

The way a Car Title Loan works is that a person gives the lender the title to their car and the lender signs on as the lien holder of the title, which effectively makes the lender the owner of that car. This is in exchange for an agreed-upon sum of money, which is the loan amount that must be paid back with interest. There is a regular monthly payment that the borrower is to pay as the standard minimum payment although borrowers are welcome to pay more. We have no prepayment penalties.

If that borrower then defaults on the title loan, the lender may either roll over the amount they owe and add on additional fees, or the lender can take possession of the automobile because the title was signed over to them in exchange for the original Car Title Loan.

If the lender chooses to take the automobile, this is known as repossession. If there is a default on an automobile and the lender chooses to repossess the automobile, they may also be responsible for those repossession fees.

What Happens if a Car is Repossessed?

Depending on the situation, if the borrower is able to get the amount of money they owe to the lender within a certain amount of time they may be able to get the car back. If the lender does, in fact, need to repossess the vehicle then they may be required to send the borrower a repossession notice prior to attempting to claim the vehicle. In the case that a borrower’s car is repossessed, then the lender will likely attempt to sell it at auction. All the money that is acquired through the sale of the car at auction will go towards satisfying the outstanding balance on the loan. Sometimes the auction price can produce more than the original loan’s balance combined with the repossession fees. In those cases, the lender is required to return those additional funds to the borrower who defaulted on the loan.

When You Can’t Afford a Car Title Loan – Co-Sign

Evaluate if you can get someone to co-sign with you. If you think that you will need support from someone else to pay off the loan, you can ask certain people to co-sign with you in the event that something like being unable to pay off the loan happens. It can be your spouse, a concerned sibling, or an ever-supportive parent – whoever it is, do not be afraid to swallow your pride to ask for help so that you can meet the monthly fees.

When You Default on a Car Title Loan – Make Extra Money

Look for ways to make extra money on the side. You might have some skills that can be monetized in order to come up with the balance for your monthly payments. These can be graphic design, teaching a martial arts class every Saturday, tutoring after school, selling baked goodies, etc. Whatever it is that you can do well, find ways to monetize it! Your target amounts should only be the balance you need to fulfill the monthly loan fees. For example, if your monthly fee is $240 and you can only afford to set aside $200 from your salary, then you only need to focus on generating an extra $40 to meet the total amount! If you make more than that from the venture then well and good: you have extra money to set aside for the following months’ dues!

See if there are some things that you can sell to make instant money. Look around you and see if you have any possessions that are gathering dust and can already let go of in order to make money to meet your monthly payments. It can be that expensive (but rarely used) camera you have gathering dust. It can be your motorcycle collecting cobwebs in the garage. You may even consider selling a few bags or shoes that are just taking up space in your closet. Hold a yard sale of things that you can part with. Not only will you have found a way to find money to meet your required payments, but you have also decluttered your house in the process!

When You Default on a Car Title Loan – Budget

Do a drastic lifestyle budget cut to quickly pay off your title loan—it might be hard to give up your daily soy latte from the neighborhood café, but if it is necessary to say goodbye to it for the number of months that you have to pay off your loan then by all means do it. Going for a lifestyle downgrade is temporary and is much easier to deal with than having your loan balloon to an amount that will require emergency intervention. Look for ways to cut back on your expenses. Cancel all your memberships (Gym, Netflix, etc.), decrease your monthly payables (electricity, internet, gas, food, etc.). If it feels very hard to accomplish this, be motivated by the fact that it is only a temporary situation and pretty soon you’ll get back to your regular routine.

When You Default on a Car Title Loan – Refinancing

If you have a title loan with another company and realize you can’t afford your monthly payments, we could help you refinance your title loan to give you a lower monthly payment1.

When you refinance your title loan, we re-establish your title loan underneath our terms and interest rates.1 We have some of the highest approval rates and competitive interest rates around, so we may be able to work with you to give you a better payment option1.

What Do I Need to Refinance a Car Title Loan?

You need a few things to be able to apply for a refinanced title loan:

  • Title for the vehicle, with your name on it
  • Photos of the front, back, and sides of vehicle
  • Proof of Income
  • Government-Issued Photo I.D. (Driver’s License, State I.D., Passport, etc.)
  • Proof of Residence (Certain pieces of mail)

Benefits of Getting a Car Title Loan

  • High Approval Rate

Inquire about a title loan, even if you have a credit score on the lower side. We direct our attention to other important factors such as the equity of your vehicle and your ability to repay the loan.1 Might look at your credit score just to make sure you are not currently declaring bankruptcy or presently going through financial counseling.

  • Efficient Funding

Get your funding as soon as the next business day3. You can find out if you are pre-approved after filling out a quick 5-minute information request. After we have your documentation, you will go over the terms of the contract with an underwriter, then you can sign your contract and get your money. We work at your pace, so the sooner you get us your information and documents, the sooner we can get you your money.

  • Quality Service

Don’t waste your time. Will make every effort possible to identify and address your unique financial needs with our vast network and resources. We also have representatives available 7 days a week with extended hours for your personal convenience.

  • No Secret Fees

Some lenders will require borrowers to make a balloon payment, which can be both expensive and inconvenient, or charge you with ridiculous early payment fees when you try to make a monthly payment on your loan earlier than the due date. We won’t ever charge you a fee for making a payment early. Also, with our convenient terms and competitive rates, you can say goodbye to balloon payments because there are none of those.

What is Considered Proof of Income for a Car Title Loan?

You can use a paystub or any of the following to show proof of income, just like when you got your original loan:

  • Settlement/Court-Ordered Award
  • Workers’ Compensation
  • Social Security

How to Apply for a Car Title Loan

Decided that a title loan is for you? With our cancellation policy, it gives you the reassurance that you need so you don’t feel instantly locked in with our title loans. You have time to sit and think on it before you are committed. Inquiring for our auto title loans are simple and easy, and we’ve made it hassle-free.

  1. Apply with us. You can apply online, over the phone. With online application, you don’t have to worry about leaving your home to apply. You can apply right from your computer, phone, or tablet – and, yes, the entire loan process can be done online.
  2. Submit your documents. Using our phone number or email, you can text or email your documents and pictures of your vehicle. That way, your representative will have your information after you send it to keep your application process running smoothly.
  3. Collect your money1Once you’ve finished applying and you’ve signed your title loan agreement, you can collect your money. You can either have your funds directly into your account with direct deposit, or find the nearest money transfer location to pick up your money.

If you think you won’t be able to pay back your title loans, it’s very important to let your lender know. Not only can you potentially avoid late fees or repossession fees, but you may be extend the time you have to repay it. Take advantage of that and don’t let financial problems cost you your car. A reputable lender will want to work with you to make sure you keep your vehicle.