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What Happens To A Title Loan If A Car Is Totaled?

  • 4 MIN READ|
  • 0 Comment |
  • 2379 |
  • by Joseph Priebe|
  • July 18, 2016 |
  • Loans

What happens if my car is totaled and I have a title loan?

It’s one of those things we never like to think about; an auto accident. In fact, apart from safe driving practices, and making sure you obey all laws of the road, it’s probably better not to think about being in a car accident at all, since the vast majority of bad drivers don’t actually experience one on a day to day basis. Annually, less than one percent of American drivers are involved in a fatal car accident, and when you factor in non-injury accidents, that number stays below five percent.

Many of you might be looking up payday loan requirements or considering title loans from CASH 1 to help you deal with some tough financial times, and yet, you might be worried about what could happen if you still owe money on the loan, but get into a car accident. What follows is not meant to describe the exact process of dealing with a car accident in reference to a vehicle which has a title loan with a lien. This is meant to give you some idea of what will likely happen, and some things you can do to protect yourself financially in the unlikely event you are in a car accident while there is a lien on your automobile’s title.

What to Do If You Total Your Car and Still Have a Title Loan

John Doe has a 2003 Ford Mustang with over a hundred thousand miles. He has taken very good care of it since he bought it used from the dealer in 2011. It is both mechanically sound as well as nearly perfect in appearance, with few dings and perhaps a scratch or two. A couple of months ago, John came into some financial difficulty and needed some money to help pay the bills. He took out a title loan in Mesa for about three thousand dollars, and has roughly five months left to pay off the loan.

But last week, John was crossing an intersection when another driver ran a red light and hit the passenger side of his car. Fortunately, no one was hurt and there was no one else in the car with John. After a short investigation, the local traffic police have determined the accident was the other driver’s fault. This is all well and good, but John still owes over a thousand dollars on his title loan. What will he do now?

Have Full Coverage Insurance

Before you consider taking out a title loan, consider getting full insurance coverage on your automobile. Many people who are not making payments on their car carry only liability insurance, and do not have collision insurance.  Having full coverage is a good way to protect the investment of your automobile, especially if you take out a title loan on the vehicle.

John immediately calls his insurance and gives them all the information from the police report. Since the police have determined the other driver was at fault, and the insurance adjuster has declared John’s Mustang a total loss, the other driver’s insurance has offered to reimburse John for the fair market value of the car.

Know What Your Car Is Worth

Even if you don’t take out a title loan, it’s always a good idea to know the value of your car. A good place to do this would be the Kelley Blue Book website. There you can input all the necessary information to determine what your car is worth, especially if you are involved in an accident. Again, even if you don’t take out a title loan, you will be better prepared to deal with insurance company offers to settle if you know what your vehicle is worth. And let’s be clear: insurance adjusters and their companies are not in business to give away money for free.

They decide your vehicle is worth less than what you found on the Blue Book website, they will offer you the lower settlement. (Another tip: if you only have liability insurance on your car, then you will most likely have to deal with the other driver’s insurance yourself. If this is the case, always speak to their adjuster in a calm and friendly manner. Never threaten to get a lawyer unless you absolutely mean it. If you use the word “lawyer” as an empty threat, the other insurance company will likely delay your reimbursement, and it could take months to collect your settlement).

John has only gotten liability coverage on his car, so he must deal with the adjuster himself. If he had full coverage, his own insurance company would have reimbursed him a fair market price for his vehicle and then sought payment from the other driver’s insurance. John informs the adjuster that he has a loan on the title of his vehicle (they call it a “lien” but this is not necessarily meant as a negative).

This does not come as a surprise to the adjuster. Many people have title loans on their vehicles, even when they get into accidents.

After a period of investigation, the adjuster determines John is entitled to four thousand dollars in compensation for his vehicle. John, having done his homework, knows his Mustang is actually worth just over four thousand, five hundred dollars. He informs the adjuster of this and offers to send a link showing his research done at Blue Book. The adjuster tells John this is unnecessary, as the insurance company is prepared to offer him the amount he has quoted. It is at this point John informs the adjuster of the vehicle title loan.

Reach a Settlement before mentioning Your Title Loan

If you are in a similar situation, do not volunteer any information, but rather answer the adjuster’s questions when asked. Politely tell the adjuster that you would like to reach a settlement figure first before you discuss any particulars, such as whether there is a lien on the vehicle.

The adjuster then asks John for information on the company holding the title to the vehicle. They inform him that they will be making a payment to the title loan company directly and then give him whatever is left. John agrees and the matter is settled.

Liability Coverage Will Not Help If Your Car Is Totaled

If John only had liability coverage on his vehicle, and he was found at fault for the accident, then he would have not have received any compensation for the loss. He would have been stuck without a car and the remaining balance on his loan would be his to pay off. It is strongly advised to have full coverage on your vehicle if you plan to take out a title loan on it.

If you find you are in need of a financial boost, come see CASH 1 for a personal installment loan, or a Las Vegas title loan (on your fully covered automobile). We have services in Arizona and Nevada.  

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