Repossession Is a Risk During Title Loans
Title loans could be great options for people who need money quickly, but may have a bad credit score. However, any financial agreement can come with its own set of risks. Lenders can legally repossess your vehicle to satisfy the remainder of the debt if you fail to make your monthly payments.
While this is typically the last resort any lender wants to take, all potential borrowers can still learn about it! If you struggle and default on a title loan, you should contact the lenders immediately to explain your circumstances. They may be able to help you come up with new agreement terms to avoid repossession.
Learn more about car title loans and what you can do if your car is repossessed!
How Do Title Loans Work?
Before you can protect yourself from car repossession during a title loan, it’s essential to understand how they work precisely. Title loans allow a person to borrow money using the available equity in their vehicle. If you obtain approval, lenders place a lien on the car title and remove it after you repay the loan.
You can have a bad credit score when applying for a title loan because lenders don’t care as much about your history. They will run a credit check during the inquiry process, but they care more about the following:
- How Much Equity Your Car Has
- If You Can Repay the Loan
Your car’s value can be the most significant determinant of your title loan approval and loan amount. Generally, qualified borrowers can expect to receive anywhere from 25-50% of the equity in the car as a loan. However, this number can vary depending on which state you live in.
It’s a federal law for lenders to check that borrowers have enough income before approving them for loans. This requirement is put in place to protect people from predatory lending practices!
What Happens if I Can’t Pay My Loan Back Anymore?
If a borrower can’t make their monthly loan payments, their vehicle can be repossessed by the lender. Depending on your state, lenders can legally do this after one missed payment. They will give the borrower a certain amount of time to pay the amount back before they sell it to make up for the lost profit. If lenders sell the car for more money than what was owed by the borrower, they must give the difference to the borrower.
While this may sound harsh, this is common with most secured loan agreements! For example, if homeowners stop paying their mortgage, the bank can foreclose on their home.
As mentioned earlier, this is typically the last resort any lender wants to take. If you are struggling with your loan payments, you should first contact the lender to explain your situation. Avoiding the problem can only result in your losing ownership of your property!
What Happens if My Car Is Repossessed From a Title Loan?
If you miss loan payments and lenders have decided to repossess your vehicle, there are essential steps you should know about during this process. Different states handle title loan repossession differently.
Borrowers and lenders both have certain rights that are respected by the law. Just as the lender has the legal right to repossess your vehicle if you don’t pay them back, you have the right to demand a fair sale in some states.
Typically during a title loan car repossession, lenders will warn the borrowers that they are going to take the vehicle. This caution gives people enough time to arrange a time and place to give the property. If you fail to respond to their notice, you may wake up one day, and your vehicle is missing from the street.
After repossession, title loan lenders must give borrowers enough time to potentially make up the missed payments and get their car back before the resale. However, borrowers also may be responsible for additional repossession fees, like paying for the vehicle in storage. These rules vary depending on your state.
Avoid Title Loan Repossession by Making Your Monthly Payments on Time!
The simplest way to avoid car repossession from a title loan is to pay back your loan on time. You can avoid late payments by setting up automatic withdrawals from your bank account! This way, you don’t need to remember times and dates.
Title loans can be helpful for people with bad credit but who need money quickly. Find out if you qualify by filling out this pre-approval form or calling to speak with a title loan representative today.