Online title loans have always been a quick and easy way for consumers to get cash if they own their cars outright. But what if they borrow money using a pink slip and can’t pay back the loan? First, let’s look at what usually happens in the early stages of a default. This will often differ from state to state, and also from lender to lender. Sometimes immediate repossession will take place, whereas companies in some states will take a little longer to repossess a car. There are federal and state laws in place to protect consumers from collectors, but the rules of a title loan are still the rules.
Contact Your Lender Before You Fall Behind On Loan Payments!
For starters, no one is going to jail for defaulting on an online title loan. It’s 100% illegal in all states for a lender to even threaten jail time. If this happens, borrowers should refer to the Fair Debt Collection Practices Act and make sure they understand their rights. In almost all cases, however, a default is subject to car repossession. It also is very damaging to the borrower’s credit which can affect their ability to qualify for credit cards, car and mortgage loans. Falling behind can even impact their ability to get a job in some cases.
There are a few things borrowers can do if they know they can’t make their next installment payment on time. You first want to contact the lender right away to negotiate a payback plan. It’s expensive for lenders to go through the repossession process as well. Often they’re able to work with borrowers to extend the loan period or lower their monthly payments. This can have an effect on your credit scores as well. But it’s still much better than having a vehicle repossessed. Often, small loan lenders won’t report payments to the credit bureaus.
So, what’s the deal if and when a repossession actually takes place? Most of the time, the car will be sold at an online auction. In many cases, borrowers are stuck with repossession costs like towing, storage, and attorney fees. Sometimes, the lender will let you reclaim the car before it’s sold, but rarely are borrowers able to do this. Otherwise, they probably wouldn’t have defaulted in the first place. Companies that offer online title loans are legally allowed to sell off the car to cover their losses if the borrower can’t pay what they owe. If this happens, the borrower’s credit will be negatively impacted. Car title loan defaults can remain on a credit report for up to 15 years. There are some things that consumers can to do to avoid or get out of a title loan. Certain states allow borrowers to refinance their online loans. Borrowers can also look into selling the car themselves and paying off the lender. If the car has more resale value than what’s owed, this can be a great option. Then, of course, if there’s enough money leftover to purchase a less expensive vehicle, the borrower can buy another car.
When all is said and done, online title loans are an expensive form of borrowing. Often with very high interest rates and terms that can make them challenging to get out of. They’re also pretty risky because there’s a car at stake. Buyers are often encouraged to consider car title loan options and alternatives to avoid future headaches. If, however, there’s no other alternative available, then title loans can be a quick and easy way to get money fast. Borrowers should beware of the consequences and only apply if they’re confident they can pay the loan back quickly. After all, there’s a vehicle at stake, and being without a car with bad credit isn’t exactly a cakewalk. On the flip side, there’s no risk of jail time if a title loan online isn’t paid back. So, borrowers, borrow away if you must. But do so responsibly.