Taking out a title loan is an increasingly popular way to get cash quickly. All a borrower needs is a vehicle, clear title, and income for repayment. In exchange, the borrower pledges the vehicle as collateral. This means if the loan goes unpaid, the vehicle is at risk of seizure and being sold to cover the loan.
Here’s what to do if you can’t repay your title loan.
What is a Vehicle Title Loan?
These are short-term loans that come due in 15 to 30 days, and sometimes in a year or more. Because they’re secured by the vehicle, approval rates are high. Borrowers do get to keep their vehicle (car, truck, RV, motorcycle, or boat) during the life of the loan. They just let the lender have the title until the loan’s repaid.
The loans typically range between $100 and $10,000 but can go much higher. How much higher depends on the lender and the state it’s in. But in the main, the amount proffered is based on the collateralized vehicle’s age, mileage, make, model, and overall condition. What the loan amount is not based on is the borrower’s credit history, as most lenders don’t even check it. The vehicle title mitigates most lender risk.
The Application
Borrowers typically can apply online. In addition to the vehicle title document, they’ll generally need proof of residence and vehicle insurance, and photo identification. Some title companies will ask for personal or professional references.
Borrowers will also need to submit with their application recent photos of their vehicle from all four angles. They also must take shots of the interior, including the odometer.
The other main documentation needed is proof of income. Borrowers don’t really want to get stuck with your vehicle – they don’t even want to “hold” it in exchange for the loan — so they do want to make sure you have the means to pay them back.
Approval can take minutes, and payment can be in hand within 24 hours. Many title companies can deposit the funds directly into your account.
What to Do if You Can’t Repay Your Title Loan
It bears repeating that you could lose your vehicle if you don’t repay your loan. Alas, despite their best intentions, borrowers sometimes find themselves unable to make their payments.
If this happens, there may be ways the borrower – you – can skirt vehicle seizure:
- Let the loan company know. If you’re in a bad spot, don’t keep that information to yourself. You must let the lender know as soon as possible, so that you can see if you have recourse. In fact, many lenders will modify your agreement to one that suits you better.
- Get the loan extended. See if this might work for you. In so doing, you can lower your monthly payment but stretch out your payment period. Yes, this means adding a few months to your payment schedule, plus interest, but you’ll still have your car.
- Do a title loan refi. See whether your lender will lower your payments by doing a title loan refinance. This calls for it to refinance your current loan by paying it off, then allowing you to borrow a bit more cash, possibly enough to put some aside so you’re better prepared for the next unexpected event. And your monthly payment will be lower.
- Cut spending to the bone. Try doing whatever you can to avoid spending a penny more than you must so that you can repay that loan, or at least get caught up to give you time to explore your other options, such as refinance or loan extension.
It’s only smart to know what to do if you can’t pay your title loan, even if you feel certain that won’t occur. But life does happen, as you know.
It’s best to be prepared.
