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Let’s say you have a large unexpected expense that requires payment right away, but you have neither the savings nor the credit to handle it. You need cash fast, so you turn to a car title loan company. Your loan is approved and funded, the emergency expense is covered and all is going well – until the unthinkable happens. You’re involved in an accident and your vehicle, the title to which you used to secure the loan, is totaled and now you’re wondering what happens next. Well, here’s what to do if your car is totaled and you have a title loan.
Understanding Title Loans
Car title loans are loans secured by the equity in your automobile. These loans can be useful when you need cash fast and lack access to traditional bank loans because of your credit history. With car title borrowing, the lender will place a lien on the vehicle’s title when the loan is funded.1 If the loan is not repaid according to the terms of the agreement, the lender can sell the vehicle to recover the loan balance. That’s why it’s important to be sure you can make your payments on time before applying for a loan.
Because a title loan is secured by the equity in your automobile, less emphasis is placed on your credit standing.1 Another benefit of a car collateral loan is you can continue driving your vehicle during repayment, as long as your account remains up to date. However, this also means your car could be involved in an accident in which it is declared a total loss – while your title loan is still being repaid.
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Insurance Claims and Totaled Vehicles
Insurance companies assess loss in a car accident by comparing the estimated repair costs and the salvage value of your vehicle to its pre-accident market value, also known as the actual cash value (ACV). If the cost to repair your car, plus the vehicle’s salvage value, exceeds a set percentage – typically between 70% and 80% of the car’s ACV – insurers usually declare the auto a total loss.
Filing an Insurance Claim After an Accident
There are several steps you should take to file an insurance claim after an accident. First, locate your insurer’s phone number for claims. You can usually find it on your insurance card, on the insurer’s website or on their mobile app. Do everything possible to report the accident to your insurance company as soon as you can – ideally within 24 to 48 hours – and definitely before the deadline outlined in your insurance policy. Provide only the pertinent facts: where and when the accident occurred, what vehicles were involved, the apparent damage to your car and whether police and medical services were involved. Avoid speculating about fault.
When you open your claim and submit the initial details, your insurer will likely request:
- Policy verification: confirm your identity, policy number and the coverage in effect on the date of the accident
- Accident details: provide the who, what, when, where and how of the collision
As the claim progresses, your insurer may also request:
- The police report
- Photos and/or videos of the damage and the crash scene
- Medical records and bills, proof of time off work and wage documentation if you claim bodily injury or lost income
- Repair estimates or body shop reports, where applicable
- Correspondence from the other driver’s insurer, if they also filed a claim
What to Expect During the Claims Process
An insurance adjuster will contact you within a few days to begin investigating the claim. The adjuster may ask you for a statement. They may also inspect your vehicle and review your records. Answer the adjuster’s questions honestly and briefly. Stick to the facts. Do not offer any speculation about speeds, distances or faults. Request an opportunity to respond in writing, or wait until after consulting a lawyer if you’re uncomfortable.
The adjuster will review the information presented and decide whether it is a covered event.
If it is determined you are covered, your insurer will review repair estimates and either approve repairs or, if your vehicle is severely damaged, declare the car a total loss. You may have a choice of repair shops, and you can insist your car be repaired using OEM (original equipment manufacturer) parts.
After determining fault and assessing damages, the insurer will calculate your settlement amount, minus any deductible. Payment will then be issued to either cover repairs or pay the loss payee the value of the vehicle if it is determined to be a total loss. If you have an active loan that is secured against your vehicle, the loss payee with the highest priority is your current lender. This means the lender will get paid first, and you will only be entitled to any insurance payments that exceed the loan payoff.
If another driver is involved, there may be coordination to determine financial responsibility.
The Impact of a Totaled Car on Your Title Loan
You remain responsible for the loan balance if your car is declared a total loss and you have an outstanding auto title loan. If you are at fault and have collision coverage, your insurance will pay the lienholder up to your coverage limits. If the other driver is at fault, their insurance might cover the lienholder entirely in some cases.
Either way, insurance payouts usually go directly to a lienholder first – in this case, the title loan lender – to cover the vehicle’s pre-collision ACV. You’ll receive the balance of the funds if the payout is more than you owe on the loan. However, if the insurance payment does not cover the entire balance, you will continue having to make your payments until the loan is paid in full.
Negotiating with Your Title Loan Lender After a Total Loss
Contact your lender immediately to inform them of the situation and inquire about your available options if you learn the insurance payout will fall short of your loan balance. Many lenders will allow you to refinance your loan or establish a payment plan for the remaining balance, if you’re going to have trouble continuing to pay off the loan. This often comes into play when an injury associated with the accident interrupts your income.
You can also try negotiating a debt settlement or a reduced payoff amount. A car title loan settlement is an agreement between you and the lender that allows you to pay off a loan for an agreed-upon amount that is less than the total amount owed. Settlement payments can be one-time lump sum payments, or several scheduled payments over time. Once all agreed-upon settlement payments are made, the lender will release the lien on your car’s title.
Tips About Title Loans and Total Loss Accidents
Accidents happen. While they’re never a pleasure to deal with, here are a few tips that can help you make a total loss event easier to deal with while you have a vehicle-secured loan:
- Carry insurance coverage: It is essential to have appropriate insurance coverage, especially if you borrow against the value of your vehicle. It is also a good idea to review your title loan agreement carefully for any clauses related to insurance, accidents or total loss before you sign it. Even if your vehicle is totaled, failure to pay your loan in full can result in collection proceedings.
- Borrow responsibly: Borrowing responsibly is another way you can protect your finances for the unfortunate possibility of a total loss accident. By only borrowing the funds you need – even if you are approved for a higher amount – you can reduce the potential amount that would not be covered by your insurance.
- Communicate with your lender or loan servicer: It is crucial to communicate proactively with your title loan lender or loan servicer to find a workable solution. Let them know about your accident and seek assistance with your loan. We have a dedicated staff of customer service representatives at LoanMart to help you with situations like a severe accident. This is just one of the reasons so many people choose car title loans serviced by LoanMart when they have financial emergencies.
Call us at 855-422-7412 to learn more, or apply online for an auto title loan serviced by LoanMart today!
