What Does it Mean to Default on a Title Loan?
Your financial situation can easily change during the repayment period for a title loan. Whether you lost your job or you were bombarded with unexpected expenses, you may find yourself unable to keep up with your title loan payments. If you default on a title loan, it essentially means that you are not repaying the loan according to the terms of your loan agreement. The exact number of missed payments that will lead you into loan default will usually depend on:
- Your State of Residence
- Your Lender
If you are late on your title loan payments, you will typically incur a late fee ranging from $25 to $35, as disclosed in your title loan contract. It’s important to understand that defaulting on a secured loan such as a title loan is a serious issue because it can negatively affect both your credit score and your financial future. In the event that you are unable to keep up with your loan payments, you should immediately contact your lender or loan servicer to discuss your available options during the repayment process. In most cases, lenders and loan servicers are more willing to work with struggling title loan borrowers who proactively communicate their financial hardship. By reaching out to the appropriate party prior to missing a title loan payment, it is possible to discuss your available options to make the repayment process more manageable.
Be aware that if you default on a loan with collateral, it may result in the lender repossessing your vehicle and selling it at auction to cover the remaining balance of your loan. While it is possible to recover your vehicle if it has been repossessed, it is important to try and work with your lender to avoid repossession altogether. Continue reading to learn more about this potential consequence and how to avoid it.
Does Defaulting on a Title Loan Affect Your Credit?
If your title lender or loan servicer reports your payment behavior to the major credit bureaus, defaulting on your loan can impact your credit report and negatively affect your credit score. Additionally, if you default on your title loan and your vehicle is seized by your title lender, understand that a vehicle repossession will typically stay on your credit report for up to 7 years.
As mentioned above, it is possible to work with your title lender or loan servicer if you are struggling to make a payment. One of your options to avoid repossession is to try refinancing your current title loan to obtain different loan terms and more time to catch up with your loan payments! Keep in mind that you will only be able to refinance your title loan if your loan is still in good standing. If you are eligible for title loan refinancing through ChoiceCash title loans, you can obtain certain perks, such as competitive interest rates and a transparent repayment process with no prepayment penalties!1
Contact a ChoiceCash title loan agent at 855-422-7402 if you have questions about loan defaults affecting your credit score. Title loan representatives are available six days a week to answer your questions and help you learn more about the consequences of a default on a title loan.
Options to Resolve Car Title Loan Default
Although defaulting on a car title loan is never a good idea, know that several options could be available to help you resolve this situation and get your loan back on track, including the following:
- Request a Due Date Change: Paying your loan by the designated due date can feel impossible if your financial situation changes. Fortunately, most lenders will usually allow you to push your due date up to two weeks forward to give you more time to catch up with your payments and to better align your loan payments with your paycheck!
- Get a Loan Extension: Many title lenders may allow you to extend your loan terms by postponing one or two payments. Keep in mind that the payments are simply moved to the end of your loan if you request to implement a loan extension.
- Ask for a Loan Modification: If you’re having continuous problems with your loan repayments since your financial situation has changed for the worse, you can ask your title lender if you qualify for a loan modification. A loan modification will essentially change the terms of your loan, which can include the length of your remaining loan, your monthly payment, due date and interest rate. If a lender agrees to a loan modification, you have the opportunity to re-amortize your loan and hopefully receive a payment schedule that better suits your current financial situation.
A car title loan default isn’t the end of the world. However, avoiding this issue and prioritizing your title loan payments is your best option to stay on track with your loan. If you’re eligible for a ChoiceCash title loan serviced by LoanMart, you can choose from a few different flexible repayment options that include automatic payments, sending a check to the mail, or paying online through the customer portal!
What Happens if Your Vehicle is Repossessed?
Title loan repossession laws and procedures can differ from state to state. The exact timeframe before title loan repossession occurs will depend on your state of residence, your lender, and the terms of your loan contract. If you are concerned about your vehicle being repossessed in the near future, it is extremely important to communicate with your lender and research the applicable laws and repossession procedures in your state.
In the event that your title lender seizes your vehicle and you want to get your car back, you will need to take the appropriate steps to resolve the situation. In most cases, you will be granted the opportunity to get your vehicle back before it is sold at auction by the title lender!
However, in order to successfully retrieve your vehicle before it is sold, you must make a payment that meets the lender’s criteria or applicable legal requirements to qualify for a reinstatement of your loan. Depending on your state of residence and your prior payment history, a payment equivalent to your current past-due amount may suffice, whereas, in some scenarios, you may be required to pay off the remaining balance of your loan plus any applicable fees (late fees, repossession fees, etc.).
How Can I Avoid Defaulting on an Auto Title Loan?
Now that you know the potential consequences of defaulting on an auto title loan, knowing how to avoid it is essential. Below are several strategies to keep in mind to prevent default on a loan:
- Optimize Your Budget Plan: You may already have a budget plan in place to handle your monthly bills and expenses, but it is important to ensure that your title loan payments are prioritized. Try to keep your impulsive spending habits in check and cut back on unnecessary expenses if you want a smoother repayment process!
- Apply for a Second Job: If your title loan payments have become unmanageable, you may want to consider getting a second job on the weekends. By getting a secondary source of income, you can use some of the funds from your second job to repay your title loan while using your primary income for your monthly expenses. However, a second job doesn’t mean you have to apply for another full-time career. You can pursue side hustles like rideshare driving or freelancing in your free time to earn some extra cash.
- Understand Your Loan Terms: Before you sign your title loan agreement, you must clearly understand the terms and conditions of your loan. If you’re unsure if you can realistically afford to pay back the loan, do not sign the contract.
- Speak to a Loan Officer: One of the best courses of action when trying to avoid title loan default is to be open and honest with your lender. If you experience financial difficulties during the repayment process, make sure to reach out to a loan officer before defaulting on your loan and try to find an alternative solution to a vehicle repossession!
If you are having trouble managing your payments and are still in good standing with your current title loan, consider applying for title loan refinancing through ChoiceCash title loans to obtain different loan terms and competitive interest rates! Simply submit a short inquiry form online to begin your streamlined application. Or, call 855-422-7402 if you have questions about the refinancing process for ChoiceCash title loans serviced by LoanMart!1
