Car title loans are an easy way to get the cash you need, fast. But, they also come with many downsides. Borrowers typically have less than a month to pay off the original loan amount plus interest. If they don’t, the loan amount and high APR continue to follow them. The lender may even end up repossessing your car.
If you’re stuck with a car title loan that you cannot pay, this guide is for you. Read on to learn how you can get out of debt and save your beloved vehicle from repossession.
How to Pay Off a Title Loan Fast
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Many borrowers wonder how to pay off a title loan quickly. After all, paying your balance in full is the ideal solution. You’ll clear your debt and get your title back, all while saving yourself time, money, and stress.
Unfortunately, clearing your debt is easier said than done. If you had the cash, you wouldn’t have signed on for a car title loan in the first place.
But, nothing’s impossible. Here are a few ways you can raise the money you need to pay off your secured loan quickly:
Seek Out Additional Income
This suggestion might seem obvious, but many borrowers don’t realize that they have the power to seek out additional income. You might consider asking for a raise at work or getting a side gig. You should also see if you can sell valuables or property to free up cash. By working extra hours or selling a few things on eBay, you might be able to pay what you owe in full.
Sell Your Car
You’re probably reading this guide because you’re worried about repossession. So, why would we suggest that you sell your car?
Selling your car might be the last thing you want to do, but it can be a practical solution. It will allow you to come up with the money to clear your debt and protect your credit score.
Once you pay off your loan, you can use the difference to buy a new car. You might have to downgrade to something less expensive but, overall, selling your vehicle can be a smart move.
Note that selling a car you owe payments on can be tricky. But, it’s possible (and legal) to find a buyer even when your lender has the title and a copy of your keys.
How to Save to Pay Back a Title Loan
However you generate extra income, you need to know how to save to pay back a title loan. Set aside money in your account every week based on your current payments and when they’re due. By being mindful of your budget, you might be able to come up with enough to cover the balance.
6 Ways to Get Out of a Title Loan
If there’s no chance of you paying back your loan any time soon, you probably want to know how to get out of a title loan debt.
While you cannot make the problem disappear entirely, you can take steps to improve your financial health. Here are some of our top recommendations.
1. Contact Your Lender
Many people think talking to their lenders is pointless. After all, their cooperability may vary from provider to provider. Even though it might seem like a long shot, it’s worth a try.
Contact your lender and explain what payments you can pay. They may accept less than what you owe to keep you from defaulting. From there, you may be able to negotiate for a lower interest rate and more flexible payments. You could even qualify for fewer monthly fees.
Note that when a lender accepts less than what you owe, you may end up with bad credit. A lower score can make it hard to qualify for future loans, but at least you’ll have a firmer grasp on your current financial debt.
2. Refinance Your Title Loan
In some cases, you might consider refinancing your title loan. You’ll still be responsible for the balance, but it’ll buy you some time and prevent your car from being repossessed right away. You’ll also save money by accessing cheaper interest rates and fewer fees. When refinancing, you have several options:
3. Get the Money From a Friend
You might ask to borrow money from a family member or friend. This solution may be more readily available and offer cheaper interest rates, but one could find it awkward to blend personal relationships with their financial situation.
4. Apply For a Personal Loan
Another option is to apply for a personal loan from banks or credit unions. However, these financial institutions might hesitate to issue personal loans to those with low credit scores. Finding a co-signer may convince banks or credit unions to take you on as a borrower, but you asking a family member or friend to take on a lot of risk.
5. Use Credit Cards
While a credit card has high-interest rates, it might be affordable than continuing to roll over your title loan every month. You could use get a cash advance that will help you refinance the balance you owe.
6. Replace Your Car Title Loan With a New One
When you don’t want to get your family involved, apply for hard-to-get loans, or rack up credit card debt, car title loan refinancing is your best bet. This option lets you transfer your title and debt from one lender to another at lower interest rates. This can reduce your payment to help you catch up.
How to Refinance With Max Cash Title Loans
Companies like Max Cash Title Loans work with muliple lenders to help you get lower interest rates for refinancing, making it easier for you to pay off the money you owe and get your vehicle back. You’ll end up paying less in the long run and prevent your car from being repossessed.
If you are struggling to repay your title loan, you might benefit from this company’s services. All you have to do is visit their website and complete the form in these three easy steps:
- Enter your car’s information (make, model, year, etc.).
- Enter your information (full name, email address, phone number, zip code, etc.).
- View your free estimate.
With Max Cash Title Loans, the process couldn’t get any easier. The website specializes in loans big and small, meaning it’s a great way to get the amount you need. Generally speaking, you won’t face pre-payment penalities. You also don’t have to worry about waiting around for the cash they need — users benefit from same-day approvals and funding. Best of all, you get to keep your car while you are paying off your balance.
What You Should Know About Title Buyouts
Both title buyouts and refinancing can help you manage your debt. The process for a title buyout, however, is slightly different.
If you want a buyout, you must find a new provider who is willing to buy your loan from your current lender. The new lender pays your balance and provides you with a new contract, typically with lower interest rates.
How to Default on Your Title Loan
If you don’t have the cash and cannot qualify for refinancing options, you might consider defaulting. Ceasing payments is definitely an option, but you need to understand the risk it comes with.
Defaulters will face low credit scores while still owing money to the lender. Additionally, their vehicle will likely be repossessed.
One could make the defaulting process a little easier by voluntarily surrender your car. By going this route, you can give up your car on your terms. And, even though a voluntary surrender will lead to bad credit, it may be more forgivable to banks or credit unions that manually evaluate your credit report.
How to File For Bankruptcy to Get Rid of a Title Loan
In some cases, filing for bankruptcy can help you get rid of a title loan. Let’s consider an example:
Say you owe your provider $10,000. Your car, however, is only worth $4,000 — the remaining $6,000 is due to accumulated interest. You choose to do “redeem” the car from your lender, meaning you pay $4,000 and get your title back.
If you filed for Chapter 7 bankruptcy, your case will discharge your personal liability to repay the remaining $6,000.
Knowing this information, filing for bankruptcy might seem like a favorable solution to getting rid of your payments. However, the decision comes with many consequences. You’ll lose property and tank your credit score, making it hard to apply for a credit card and participate in other types of borrowing.
Before filing for bankruptcy, you should exhaust your other options and talk to a lawyer.
How to Fight a Title Loan Company
When you sign on for a title loan, you may become a victim of lenders. Some companies will use sketchy tactics to charge you more than the law permits them to.
As a borrower, you should be aware of your legal protections. For instance, in Florida, a lender cannot implement an interest rate exceeding 30% on the first $2,000 you borrow. Additionally, if a lender repossesses your vehicle and sells it, they don’t typically get to keep all of the cash. They take the amount you owe (the original loan amount plus interest), but the lender should deposit the rest of the proceeds into your account.
So, make sure you read up on your state’s legal protections. If you think that your lender is taking advantage of you, contact a lawyer. You may be able to get out of your contract, get the remaining balance from the sale of your car, etc.
Military Lending Act
You may also qualify for other protections under the Military Lending Act (MLA). This federal law applies to active-duty service members and their spouses, dependents, etc. So, even if you are not in the military, you may qualify for these protections if your spouse or parent is.
According to the Military Lending Act, a title loan may not exceed interest rates of 36% for those who qualify. Additionally, lenders may not penalize them if they repay their loan in advance. These protections can go a long way in making your payments more affordable and helping you pay off your loan quickly.
How to Avoid Car Title Loans in the First Place
On the surface, car title loans seem like a saving grace to someone who is in a financial crisis. They are easy to qualify for and give you fast access to cash.
But, in some cases, consumers find out that these agreements are not for them. They can create more problems than they solve as they come with high-interest rates and excessive fees. Plus, if you can’t pay, the lender is within their rights to sell your car.
When paying off a car title loan, it should be done in a short time frame so you do not have to keep paying the interest. The tips we covered in this guide can hopefully help you get out of your sticky situation.
So, use this experience as a lesson. Next time you’re in a tricky financial position, think twice before taking on another car title loan. Cheaper alternatives may include:
- A credit card cash advance
- Contacting social services or charities
- Getting a second job
- Peer-to-peer borrowing options
How to Get Out of a Car Title Loan Without Losing Your Car — The Bottom Line
Struggling to pay your title loan? You’re not alone — many users are unable to keep up with the high-interest rate as they didn’t have the money in the first place. As a result, they risk losing their car and suffering from poor credit.
We understand that the situation you’re in is difficult and even embarrassing. Luckily, with the help of this guide, you can clear your debts. Consumers have the power to scrape up the money they need, negotiate with their provider, default, etc. Perhaps the most practical fix, however, is refinancing.