It’s not necessarily hard to find affordable title loans these days. There are hundreds of options both locally and online for creditworthy applicants. You simply have to apply or register for the service, wait for with a credit decision, and in doing so, you can keep driving your vehicle. It’s so simple that even the requirements are easy to complete, given your name, government-issued identification card (ID), and proof of your income source. Nonetheless, it must be noted that online title loans require a commitment in the way that you need to pay for the cash that has been provided to you on the spot.
The problem is that many people struggle to make payments on their loans. When they first take out a title loan everything is good. They have a large sum of cash and the monthly payment is within reason. The problems start down the road, usually after 3-6 months of making payments. As a result, they end up defaulting on their online title loans. This results in the question “Will I got to jail for defaulting on a title loan?” This article will respond to this question according to the law, but before that, you have to learn more on the title loan itself.
What is Legally Required for A Title Loan
With most online title loans, you have to provide collateral, mainly derived from your assets. Instead of just your proof of income, getting a title loan requires your assets because of two reasons. Primarily, your qualifications are determined not based on your credit score. You can get cash instantly once your application is approved.
The most common type of this loan involves car title. In other words, as a borrower, it is compulsory for you to own a vehicle. You also have to sign over ownership to a lender, specifically handling auto loan title services. The company will probably write the loan for up to a quarter of the vehicle’s value. They will also keep the pink slip for security, in cases of default.
A borrower usually has to pay within one month and the loans can range from a small amount to a very high value. Consequently, once you default the loan, your vehicle will be taken by the lender.
How Much Does a Title Loan Cost?
A decent monthly salary is required for most online title loans. The amount you have to pay for may be a lot, such as a quarter of what you have borrowed. For instance, if you applied for $2,000 worth of title loan, you will likely have to pay a quarter of the cost monthly, which is equivalent to $500. After 30 days, the amount you owe will be $2,500.
In case you borrow money for a year, you have to determine the annual percentage rate (APR) from the lender. This is determined by your borrowed money amount, fees, interest rate, and the period of money lending.
What Happens When You Default on Online Title Loans?
The default of title loan is described by a borrower’s failure to repay the money that has been lent in compliance with the terms agreed by both parties. Apparently, you need to hand over your car’s title to the lender. Otherwise, you may consider the rolling over perks for the loan. This takes place by paying another monthly fee, allowing you to borrow the money for another month. However, it is anticipated that as you roll over several times, the situation will end up with you not being able to pay.
The vehicle repossession terms differ from one place to another. There are cases that immediate repossession takes place, whereas other states may take the borrower’s car for a considerable longer grace period. In situations like this, it’s important to know your legal rights. There are numerous state and federal laws that protect consumers from bill collectors. Start with reading up on the Fair Debt Collection Practices Act. In addition to this federal regulation, there are dozens of state and city specific rules that protect consumers who fall behind on online title loans.
So, Will You Go to Jail if You Default Your Title Loan?
Many people are worried about being treated unjustly by the lender once they default the title loan. It may be happening in some places, but under the law, a lender is not allowed to make threats. Asset takeover by force, physical threats, or anything of similar measure are not allowed. The lender has to avoid spoiling the borrower’s decorum.
Most importantly, you cannot be arrested for default on an online title loan. You cannot even be persecuted for not repaying car title loans. The lender only has the power to put away your vehicle in a reasonable way. There must also be a notice regarding this movement. In case a company threatens that you will be jailed, they could be sued for violating the Fair Debt Collection Practices Act.
How to Prevent Title Loan Default?
Prior to committing to a car title loan, you should check out other resources first. It has been an ongoing myth that companies often charge their borrower’s high-interest rates. As a result, many firms have released offers with lower interest rates due to the competitive industry. Nonetheless, there are more dependable options than using your assets as collateral, such as the following:
- Savings Accounts
- Bank Loan or Credit Union
- Family or Friends Assistance
- Credit Card
You could decide which of your options is best by determining the fees, APR, the period of repaying the money, and the consequences of not compensating.
It is all about careful decision-making before taking that leap for a title loan. Always decide based on what is best for you. When you’ve made the decision be sure to compare collection practices of all the top online title loan companies. It’s important to know what lays down the road if the worst case scenario occurs and you default on a title loan!