Understanding Title Loan Repossession
When you take out an auto title loan to handle a financial emergency, repossession is probably the last thing on your mind. The easiest way to understand title loan repossession is to learn more about title loans themselves and how the repayment process works for a secured loan. Title loans are secured by the title to a qualifying vehicle. This means that an individual is pledging their vehicle’s title as collateral to guarantee the loan.
This makes the loan secure and also offers a more flexible application process. The loan is typically paid off either in a singular payment or installments depending on your state of residence and the lender you are working with.1 5
While secured loans are flexible in terms of their credit requirements, there is a potential risk to consider with borrowing against the equity in your vehicle. Defaulting on your loan may result in the lender seizing your vehicle.
This is commonly known as vehicle repossession. The laws surrounding it can vary from state to state.
You may have more options than you think if you are struggling with your payments!
Whether you need to refinance or extend your loan term, the easiest way to move forward is to proactively communicate with your title lender or loan servicer. Let Max Cash® Title Loans teach you more about the title loan process.2
What Happens if I Don’t Pay My Title Loan?
If you default on a title loan and do not make payments, the potential consequence is vehicle repossession. Some lenders may be required to send out a notice that your car title loan is in default. This letter will notify you that it will be repossessed by a certain date if the loan payments are not caught up with or the loan is not paid in full. In some cases, you will not be notified.
How Many Title Loan Payments Can I Miss Before Repossession?
A defaulted payment means the borrower has failed to make the payments required to keep the loan account in good standing. Default occurs typically after 30, 60, or 90 days of missed payments depending on the borrower’s state and the terms of the loan agreement that the borrower signed. A title loan that has entered loan default is more likely to go into repossession status. When this situation occurs, a lender or loan servicer will typically call the borrower and try to collect the unpaid debt. Not working with your lender can have consequences like:
- Reducing your credit score
- Hurting your ability to get future credit
So, what happens if you don’t pay back a title loan? If reported to the major credit bureaus, a title loan repossession can wreak havoc on your credit report. Typically, a vehicle repossession will stay on your credit report for up to 7 years! The long-term consequences of a title loan repossession outlast more than just losing access to your car. If your credit score is damaged, it can take years to fix it.
What Happens After Title Loan Repossession?
If your car is towed and repossessed because you have fallen behind on your payments, your lender may decide to sell your car at auction to recover the remaining balance on your loan. As mentioned above, repossession laws tend to vary from state to state, so researching the specific laws in your state is imperative if you find yourself in this situation.
When there is any property within the car, the lender must return it to the borrower. However, repossession is the last resort for most lenders. The goal is to have the loan paid off before it gets to that point.
Steps to Take to Recover Your Repossessed Car
Many things are outside your control during a financial crisis. But, you have control over your communication with the lender during title loan repossession. If you contact your lender or loan servicer before you miss a payment, they may be more willing to work with you to come up with a resolution. Most people believe that speaking to a lender will make things worse.
However, the reality is that you should just give them a call to discuss your options. Being transparent about what is happening allows for open and candid discussions that will help you build trust with the lender.
Give them a call! A title loan lender may offer you a “grace period” to catch up on your payments.
Additionally, you may be able to an extension or work out a payment plan that better suits your particular situation. If you receive a loan extension, your due date can be extended a few weeks in the future. This may offer you valuable time to catch up on your payments. But, it does extend the overall life of your loan.
What if My Lender Won’t Negotiate with Me?
If your lender is not willing to negotiate with you, then your only other option is to let them repossess your vehicle. They will impound it and auction it in order to satisfy the debt. Or, you can pay the loan in full. This means that you must pay off the entire outstanding balance of the loan, plus interest. Keep in mind that when your vehicle is sold, if it doesn’t cover the entire outstanding balance, you may be held liable for the remaining amount.
Car title loans are not designed for you to default on the loan. Generally, the last thing that the lender wants to do is to repossess the vehicle. But, you must find an auto title loan that has monthly payments that you will be able to afford. Max Cash Title Loans can help with that!5
Grace Period vs. Deferments
There are two types of grace periods associated with loans: grace periods and deferments. A grace period is a time that creditors give borrowers to make their payments before incurring a late charge or defaulting on the loan. Interest may or may not accrue during grace periods. This will largely depend on the loan’s terms and the lender you decide to work with.
Deferments are also periods of time in which borrowers do not have to pay on loans. However, deferments most often require an application and proof of financial hardship before the loan holder may grant them. Most deferments are not guaranteed. Therefore, borrowers need to be prepared to pay their loans or risk being in default. Typically, a grace period is anywhere from 30 to 90 days.
How To Stop a Car Title Loan Repossession
If you ignore all of the communication you receive from the lender and make no attempt to pay back the loan, your vehicle will be repossessed. You could owe them even more money for the repossession, storage, and auction fees.
If you are unable to make any payments, there are a couple of things that you can do when it comes to your vehicle.
- Negotiate a payment plan: If you’re having trouble making payments, reach out to your lender and ask if they will accept a payment plan or reduced payments until you can get back on track.
- Refinance the loan: If your current loan has high interest rates or unfavorable terms, you may be able to refinance the loan to a lower interest rate or better terms. That’s where Max Cash Title Loans can help you! You can apply for title loan refinancing today online with us or over the phone at 855-561-5626.
- Seek assistance from a credit counselor: A credit counselor can help you negotiate with your lender and create a budget to get you back on track.
- Consider a loan modification: If you’re facing financial hardship, you may be able to have your loan modified to make the payments more manageable.
- Make a lump-sum payment: If you have access to the funds, making a lump-sum payment can potentially prevent repossession.
It’s important to act quickly if you’re facing repossession. Do whatever you can to get your account in good standing, or keep it that way!
You Have Rights with Title Loan Repossession
Even if your car is repossessed, you still have certain protections depending on your contract and the state you reside in. For example, the lender or repossession agency can repossess the car, but not the items inside. If you leave anything that is important to you in your car, the lender can’t keep those items or sell them. In some states, the agency may require you to give them a list of items inside the car. Then, they will tell you how you can retrieve them. If that is not the case, you may have to call them. Contact your specific lender for more information on how to retrieve your personal belongings.
Additionally, depending on your state of residence, you may be entitled to proper notice of repossession. This means that your lender legally has to contact you in the appropriate manner and notify you that a repossession will take place.
Is a Charge Off Better Than a Title Loan Repossession?
When a debt has been charged off, it has most likely been turned over to a collection agency. This action, just like title loan repossession, stays on your credit report. When a car is repossessed, the lender not only gets to keep the money you’ve already paid, but they take your vehicle. In some cases, you will still owe the deficit balance after the vehicle is sold. A charge-off is sent to the collection agency to collect the debt for the original lender. Both options have the potential to negatively impact your credit score and are not ideal.
What Happens If I Pay My Loan Back?
Often, a lender can let you get your car back if you pay back what you owe, along with any repossession fees that have been added. Most importantly, you are allowed to do so before it goes to auction for sale. If you are able to avoid title loan repossession and pay off your loan in full, a few things happen:
- Confirm your final payment details with your loan agent. Then, let them know you want to start the title retrieval process.
- Your car title becomes lien-free through different mediums. This could be done electronically, manually, and by submitting an official form with your vehicle title information at your local Department of Motor Vehicles (DMV) or state equivalent.
- Visit the local DMV near your area and get your car title ownership back.
Can I Refinance My Car Loan If My Vehicle Has Been Repossessed?
If your loan is not in good standing, you may not qualify for title loan refinancing. The process of refinancing pays off the existing loan and replaces it with a new loan. This gives borrowers somewhat of a fresh start with new loan terms. It also allows you more time to pay back what you owe. If you are struggling with your payments, consider this option!
If your financial situation changes, your payments may be unmanageable. Call us to discuss the potential refinancing options with Max Cash Title Loans!5
When you need title loan refinancing, do not hesitate to apply for a hassle-free online experience! Call Max Cash Title Loans today for a quote, free of obligation!