Auto title loans can offer quick access to cash for borrowers without savings or applicants who cannot qualify for traditional bank loans.1 In urgent situations, they can serve as a practical and fast solution that can help borrowers out of a jam.
Because the borrower uses their vehicle as collateral to secure their loan, and because some title lenders report payments to credit agencies, it’s crucial to make payments as agreed. Here are some tips for safely repaying a title loan on time.
Understanding Title Loans
What are Title Loans and How Do They Work?
With title loan options like ChoiceCash, consumers can use their fully or almost paid-off vehicle that’s registered in their name as collateral for a loan.1 If they’re approved, the lender will put a lien on their car title for the length of the loan and release it once the balance is fully repaid.
Although we review credit reports, ChoiceCash places greater emphasis on the borrower’s income and ability to make consistent loan payments.1 However, if the customer misses their payments, the lender could repossess their vehicle. Before taking out an auto title loan, borrowers should be confident in their ability to make the required loan payments on time.
Note that customers can use their secured title loan for any household or personal need and can continue driving their car as usual while staying current on payments.1
Common Title Loan Terms and Conditions
It’s important to be well-informed before taking out a car title loan, or any other loan for that matter. Common terms and conditions associated with auto title loans that borrowers should understand include:
- Loan amount. The loan amount primarily depends on the vehicle’s value and the borrower’s income.1 It is comprised of the loan proceeds, which are the funds that the borrower receives, and additional amounts as applicable to cover fees related to making the loan.
- Loan term. There’s a wide variety of title loan terms offered, depending on the lender you choose. Terms can be as short as 30 days, although some lenders may offer terms up to several months or a few years.
- Interest and fees. The interest rate and fees associated with a loan determine the cost of borrowing. ChoiceCash offers competitive interest rates and there are no surprise loan fees.
- Collateral. The lender uses the borrower’s vehicle to secure the loan.
The Importance of Understanding the Loan Agreement
It’s crucial that borrowers understand their title loan agreement, as it holds the terms, conditions, and legal obligations that govern the loan. Knowing the agreement details helps borrowers understand the risks, fees, interest rates, repayment schedule, and what happens in case they miss payments.
Creating a Title Loan Repayment Plan
How to Assess Your Monthly Budget for Loan Payment
Before signing up for a loan, it’s a good idea for borrowers to assess their monthly budget to see if there’s even enough room to take on a loan payment. To evaluate their monthly budget for making title loan payments, borrowers can:
- Evaluate their overall financial health. This means gathering financial documents and listing monthly income, expenses, and debts.
- Use a loan calculator. This can help borrowers estimate payments for various loan amounts and interest rates.
- Create a tailored budget. A tailored budget should include funds for essential expenses and obligations. Customers should figure out whether they have room in their budget to comfortably afford their monthly payment.
Setting Up a Timeline for Payments
Setting up a timeline for making payments can be a helpful tool to borrow responsibly. To create a timeline for title loan payments, borrowers can:
- Carefully review the loan agreement to understand the repayment period and payment due dates.
- Create a repayment strategy that includes budgeting for the monthly payments.
- Set up a payment schedule that’s aligned with the monthly due dates of the loan. To avoid late fees, customers should consider making payments on or before the due date.
- Aim to pay off the loan early to minimize interest costs, by scheduling extra payments when possible.
Tools and Resources for Effective Budgeting
Borrowers can effectively budget by using various tools and resources such as:
- Budgeting and tracking apps like Rocket Money and Goodbudget
- Budgeting calculators and online templates such as those from the Federal Trade Commission
- Credit card and bank statements to help them understand spending patterns
Making Timely Payments
The Potential Consequences of Late Loan Payments
If a borrower is late with their payment, the lender may charge them a fee for being late. Further, the lender may report the past-due payment to credit bureaus, potentially lowering the borrower’s credit score.
Setting Up Reminders for Payment Due Dates
Customers can use financial software, banking apps, or apps on their smartphone to set up recurring reminders for payment due dates to avoid missing a loan payment. To ensure timely payment, they may want to alert themselves a couple of days in advance.
Exploring Automatic Payment Options
Automatic payment options allow customers to make their loan payments automatically on scheduled dates, avoiding late fees and making money management easier. Borrowers can set up bank-initiated payments through their online banking platform. In some cases, they can also authorize the lender or loan servicer to withdraw payments directly from their bank account on the agreed-upon dates.
With ChoiceCash, customers have a variety of ways to make payments, including via phone, at participating money transfer locations, or via recurring bank account or debit card payments.
Communicating with the Lender or Loan Servicer
The Importance of Maintaining Open Lines of Communication
It’s important for borrowers to openly communicate with their lender or loan servicer. That’s especially true if a borrower expects to not be able to make an upcoming payment on-time or in full. Maintaining honest and proactive communication in that case has several potential advantages, including:
- Early intervention, with lender support, during cash flow or financial issues
- Effective risk management and avoidance of costly outcomes
- The possibility to protect ones credit history
How to Negotiate Payment Terms if Needed
ChoiceCash borrowers who experience hardships or difficulties making payments should contact the customer service team to inquire about payment options. We pride ourselves on excellent customer service and support, so customers shouldn’t hesitate to call 855-422-7402 with any questions about loan payment terms.
Understanding Your Rights as a Borrower
With a ChoiceCash title loan, borrowers enjoy several rights. Borrowers right can both be a result of the laws that apply to ChoiceCash title loans, and loan terms that ChoiceCash voluntarily provides. Some of the key rights that ChoiceCash borrowers have include:
- No prepayment penalty: Borrowers have the right to pay off their loan at any time without penalty.
- Transparency: ChoiceCash clearly informs borrowers of all loan terms.
- Fair treatment and practices: Federal and state laws are in place to ensure that borrowers are treated fairly, even when a loan requires collection efforts by the lender or loan servicer.
Avoiding Common Pitfalls
The Dangers of Rolling Over Title Loans
Rolling over a loan means extending the loan term which can result in paying additional interest and fees. This can quickly increase costs and potentially trap the borrower in a cycle of debt.
Recognizing Predatory Lending Practices
Predatory lending practices often involve unfair, deceptive, or abusive loan terms or practices that benefit the lender at the expense of the borrower.
Key signs of predatory lending that potential borrowers should look out for include:
- Excessive or hidden fees
- Balloon payments
- Aggressive sales tactics
- Unclear or misleading terms
- Requests for upfront payments
With ChoiceCash title loans, there’s no need to worry about that – ChoiceCash loans are designed to be transparent from start to finish, and there are no upfront payments or balloon payments.1
Tips for Avoiding Additional Loan Fees and Charges
To avoid additional loan fees and charges, borrowers should:
- Shop around and compare loan offers
- Improve their credit score to qualify for better rates and fees
- Make loan payments on time or set up automatic payments
- Borrow only what is necessary
- Carefully review loan documents before agreeing to terms
Benefits of Timely Payments
How Timely Payments Can Improve Your Credit Score
If a lender or loan servicer reports loan payments to the credit bureaus, a title loan can affect the borrower’s credit. While late or missed payments may harm the customer’s score, regular on-time payments can help improve it. Once the borrower pays off their loan, the fully-paid auto tradeline can also appear on their credit report.1
Note that even if an applicant has poor or limited credit, they may still be eligible for a ChoiceCash title loan.1
The Long-Term Advantages of Managing Your Loan Responsibly
Over the long term, key advantages of responsible loan management with ChoiceCash include:
- Financial stability and the potential for credit improvement
- Flexibility and early payoff, allowing borrowers to reduce their debt sooner and save on interest
- Vehicle retention, which avoids disruption in daily life
- The potential for reducing interest rates over time2
If you manage your loan responsibly and make on-time payments, a title loan can provide quick and dependable access to funds. Start your online application today!