Cash 1 Blog
How To Get Out of a Title Loan
A title loan is a secured loan, usually secured against vehicles such as cars, trucks or motorcycles. A title loan is a similar concept to mortgaging but unlike mortgaging, a title loan can only be applied to vehicles. But before I explain how to get out of a title loan, I think it is important to explain what a title loan actually is.
What is a Title Loan?
As I mentioned earlier, title loans are almost exclusively applied to vehicles. For example, let’s suppose you need money fast, but you don’t want to sell your car or motorcycle because it is your only mode of transportation. It may be beneficial to get a title loan. In exchange for money, the lender takes possession of your vehicle’s ownership documents (title) until the debt has been repaid, and at that point in time, they return them to you. If you don’t pay back the debt you owe, the lender can legally take possession of your vehicle in order to sell it as repayment for the defaulted debt.
Since most individuals require their vehicle to get to work or get around town, giving up their vehicle is clearly not a good option. So what happens in the event that they can't pay back the loan? Worst case scenario, you default, lose your vehicle and have a disdainful mark added to your credit report. Best case scenario, you call your lender and are able to renegotiate the terms to make it more manageable to pay back the debt. But you may be wondering, how can I get out of a title loan and achieve this best case scenario?
How to Get out of a Title Loan
Getting a title loan may seem like it is the easiest thing in the world to do but repaying it may not be so easy, especially for those that have trouble with their finances already. The best way to avoid the loss of your vehicle is to pay your debt installments regularly. This means that you should make payments on whatever interval you decided on with your lender. Missing payments will eventually result in you defaulting on the title loan and potentially losing your vehicle, or you deciding to roll your debt over which will only result in you paying more in interest. For those of you looking to get out of a title loan, here are the options you have:
- Pay off Your Debts Regularly
Simply put, this is the best way to get out of a title loan, albeit not the easiest method since you probably took out the loan because you were in need of money. It is important that you prioritize putting aside enough money so that you can make steady payments to pay off your title loan fast. The more money you are able to put aside, the better. The quicker you are able to pay off your loan, the less you will have to pay in interest. If you happen to have extra money at the end of the month make sure you put if towards paying off the loan.
- Take Out another Loan to Pay off Your Title Loan
While this might not seem like a good idea at first glance, it is a viable option for those that are desperate to try and keep their vehicle; especially if it’s your main mode of transportation. Doing this will merely put the problem off for another month or so, and you will still have to continue making payments in order to pay off the money that you borrowed from your new loan. If you are considering taking out another loan, you may want to contact CASH 1, we can refinance your title loan from other lenders and beat their rate!
- Sell Your Car
Suppose you don’t have money to buy out your title loan and you also don’t want to take another loan, selling your car may be your best option. After reading the last sentence, you may be thinking; how will selling my car help me out of the situation I’m currently in? Well if you decide to sell your car you’ll be able to use the money that you get from the transaction to pay off your loan. Using this method will also allow you to save money on paying interest as you will only have to pay interest for however long you had the loan out. However, if your car is your only mode of transportation then this obviously won’t work. But don’t worry; there are still other ways you can get out of your title loan.
- Negotiate with Your Lender
If you find yourself in a position where you feel as though you won’t be able to pay off your title loan, the first thing you should do is contact your title loan company and inform them that you are having trouble paying off the loan. They will be able to work with you to get a better payment plan or push back your payment deadlines so that you can get the money together and you won’t have to lose your car. Understand that they would rather have you pay off your loan than have to take away your car, which is potentially your only form of transportation. If your lender does decide to push your payments back, you will end up paying more in interest, so it’s always a good idea to try and keep up with your scheduled payments.
Defaulting on a title loan is one of your options, but this is your worst option. Not only could you potentially lose your car, but it could also negatively affect your credit score. Even if the lender decides to take your car as compensation for the loan, you may still end up having your wages garnished if the car isn’t valued enough to cover your loan. This might be the option for you if you don’t mind hurting your credit score and your vehicle isn’t the only form of transportation you have.
Heather Willis is a seasoned personal finance writer dedicated to helping individuals take control of their finances in order to achieve their financial goals.
She has contributed topics on loans, money management, debt, investing, and retirement planning for CASH 1.
Her experience of more than eight years within financial industry has helped readers gain the most recent financial information and advice.
When she's not writing, Heather likes discovering new places and listening to punk music.