What is a Car Title Loan?
A car title loan is a type of secured loan. Getting a title loan means borrowing against the value of your qualifying car by using its title as collateral for the funding. Obtaining funding is as simple as meeting the lender’s requirements, having the right paperwork, and signing your agreement!5
Title loans can be much more flexible and cater to individuals with bad credit because they are secured by collateral, which is the title of a qualifying vehicle. Secured loans, such as auto loans, vehicle-secured loans, and mortgage loans, carry a certain level of risk since an asset is used to guarantee the loan. Defaulting on a secured loan can result in the loss of the asset. In the case of title loans, that means your vehicle.
A vehicle-secured loan can be a lifeline when you need fast cash to take care of unexpected expenses or large purchases. But if your financial situation changes, how do you get out of a title loan? Keep reading to learn more about title loans, how they work, and how to get out of a title loan when you are struggling with your monthly payments.
What are the Three Ways I Can Get Out of a Title Loan?
Completely paying off your title loan is by far the most successful way to get out of a title loan. For most people, that may not be an option. If your financial situation has changed and you can no longer manage your title loan payments, you may need to find other ways to get out of a title loan. Getting out of a title loan is possible by paying it off completely. Therefore, that route should be your first option. Otherwise, consider two other ways to manage your title loan and get back on track financially.
Refinancing Your Loan
If paying off your title loan in its entirety is not an option, consider refinancing your current loan with a new lender or your existing lender. When you refinance your title loan, you essentially get a new loan to pay off your existing loan.5
Refinancing your title loan can help you access more competitive interest rates and get more time to pay the loan back, which can allow you to manage your payments better. Keep in mind that refinancing your title loan could result in higher interest rates, so only explore this option if the APR (Annual Percentage Rate) on your new loan is lower than your existing loan.4 5
Discussing Alternatives With Your Title Lender
In some cases, you can modify the terms of your existing loan or be granted a loan extension. The only way to learn more about whether this option is available for you is to discuss your options with your title lender or loan servicer. Be sure to ask questions and get all the information you need before making a decision.
Different Ways to Pay Off Your Title Loan and Keep Your Car
If refinancing or loan modification is not an option, you must find different ways to pay off your title loan and keep your car. When you’re struggling financially, the most important thing to keep in mind is that you are not alone, but you are in charge of making the decisions for your future. Check out the following options you may have to pay off your title loan:
- Borrow Money From Close Friends or Family: This is a great option if you are looking for an interest-free loan. It also allows you to maintain control of your finances and pay off your loan in installments. However, it is important to make sure both parties are clear on the terms before signing the agreement.
- Try the Debt Snowball Method: This method involves paying off your smallest debts first. Then, move on to larger debts, like your title loan payment. This will help you stay motivated to pay off your loan, as you will feel like you are making progress. Tackling your debt and creating an effective repayment plan to pay it off can be a solid strategy to get out of your title loan.
- Get Another Source of Income: Consider taking on a side job, freelancing, or starting a business to earn extra cash and create an emergency fund. This can help you pay off your loan faster and give you some financial breathing room.
Make sure to track your progress. This will help you stay motivated and see how much progress you have made to hold yourself accountable!
How Does Title Loan Repossession Work?
A vehicle title is used to secure the funding. A borrower may be unable to repay their loan and end up in loan default. The lender title loan company may decide to seize the vehicle to sell it and pay off the debt. For most title lenders, avoiding repossession is ideal. They may be willing to work with a borrower to find an alternative solution. To take this route, reaching out before the loan has entered default is preferred. A loan enters default after the payment has not been made for a certain period of time. This is often after 30, 60, or 90 days.4
Bottom Line When Getting Out of a Title Loan is Difficult
When getting out of a title loan has become too difficult, you may feel like you’re out of options. Whether you try to refinance your current loan or create a solid repayment plan to pay off your debt, you get to make the call toward your future! To learn more about refinancing or paying off a title loan, call Max CashⓇ Title Loans at 855-561-5626 today.2 5