Title loans for cars are like cozy beds: They’re simple to access, and then you’ll need to exit. They’re generally costly and tend to last for longer than initially thought. They also carry a risk: you may lose your car and make it difficult to commute to work or get around safely (unless you can get reliable public transportation). In the end, you could continue to pay the loan over every month.
There are 6 alternatives to legally get out of an auto title loan and a few helpful tips to help protect your financials.
6 ways to get out of debt without losing your car
Repay your loan
The most simple approach is to repay the loan, but it’s easier said than done. If you had money you needed, you wouldn’t need to have borrowed. However, if you have enough cash to pay back your loan, get in touch with your lender and ask for instructions on how to pay it off.
Change the Car
If you don’t have any extra funds, it could be good to sell the vehicle to earn cash. Selling is challenging without a clear title (when you’re still owing money). However, upgrading to a less expensive but safe vehicle could save you thousands or hundreds of dollars in interest and costs. It is also possible to free up the cash flow each month by making lower installments.
Negotiate
The lender you already have might be willing to cooperate with you, and it’s worth negotiating. Give what you can afford to pay, and check if the lender will accept the offer. If your financial situation is spinning into chaos, the lender may prefer to take some money from you before you’re completely insolvent. Even when the situation isn’t that urgent, you may find that the lender has options. For instance, there might be a way to reduce the interest rate or make other changes that can decrease your monthly costs.
Default
A different option would be to cut off payments, but you should be aware of the consequences before taking this option. If you default on a loan, it will harm your credit score, and the lender could eventually have to repossess the car. In the end, you’re left with a bad credit score and no vehicle or vehicle and likely to be in debt. If you decide to surrender your car, it can help improve your situation, but you’ll still have lower credit scores. However, on the plus side, you’ll no longer have to make the monthly payment, which could be enough to put your finances in good shape.
Consolidate or Refinance
Another method to end the Title loan would be to swap it with another loan. It doesn’t address the primary issue (that you’re in a cash crunch) but it will slow the flow. A fixed-rate loan from a financial institution or credit union, or online lender can be cheaper than the option of rolling over your title loan every month. A convenience check made using a credit card may lower your expenses if you’re sure you’ll be able to repay it before promotions expire. Paying off the title loan will also allow you to receive the title back.
If you’re having difficulty getting accepted for a better loan, check with local credit unions and banks which offer an increased chance of being approved. Peer-to-peer lenders online are worth looking into. If nothing else works for you, a close friend may be willing to sign and assist you in getting accepted. Be sure that they know that they are capable of taking on the responsibility of repaying this loan in case you aren’t able to.
If your lender is willing to accept less than what you have to pay, your credit score is affected because you have to pay less than the agreed-upon amount. Your credit score will be lower for several years, and borrowing will become more expensive and difficult for you over that period. But, a settlement may assist you in getting back on good footing.
Filing for Bankruptcy
In many instances, bankruptcy can provide a limited relief from the burden of auto title loans. It could assist you in avoiding personal liability in the event of a deficiency judgment, a legal ruling that says you have to make payments equal to the price of the vehicle and the amount that you owe to the car. However, the vehicle is often used as collateral for the loan, and it could be confiscated if you do not payback.
Before you decide to take the extreme step of declaring bankruptcy, you must consider speaking with an attorney local to you. A licensed professional in your region could be able to identify the important aspects that this article doesn’t cover.
Avoiding Title Loans
The best option is to stay clear of title loans initially. Once you’ve overcome this financial hurdle, you should be prepared for the next one. Make a savings account of 3 to 6 months of expenses (or at least more) and build your credit score so that you be able to make more choices when you require a loan.
Military Borrowers
The Military Lending Act (MLA) gives additional legal protections against unfair lending practices for military members and their dependents. Alongside other safeguards provided by the MLA, it prohibits the service members from being penalized with an interest rate higher than 36% or penalized for repaying the loan early.
If you’ve got any questions regarding the MLA, you can get in touch with Military OneSource for assistance. They will be able to answer your questions.
Frequently Answered Questions (FAQs)
What amount can I receive through the title loan?
It is possible to secure a loan amounting to as much as 50% of the car’s worth. Make sure you consider the costs associated with the loan before deciding if it is the right decision for your situation.
What will happen if a title lending firm goes out of business?
If a business you owe money into bankruptcy, then you could or may not be able to get rid of the obligation. Debt collection companies specialize in purchasing the debt of companies that do not wish to pay it back, such as businesses that are closing down. Your debt could be transferred by one of the collectors, as the title loan business tries to recover as much of its losses as they can. If this occurs, you are still in your position as a borrower, as you’re still owed your entire due amount.
