Car Accident While Owing Money On A Title Loan It can be stressful and frustrating when you’re involved in a car accident while still owing money on a title loan. This is also confusing for many drivers, who wonder how this affects the status of the loan. After all, the car is the collateral on […]

Car Accident While Owing Money On A Title Loan

It can be stressful and frustrating when you’re involved in a car accident while still owing money on a title loan. This is also confusing for many drivers, who wonder how this affects the status of the loan. After all, the car is the collateral on the loan and that loan was based on the car’s value. Damage from an accident can reduce the value of the car.

There isn’t one single answer for what happens with damaged and totaled car title loans. It depends on several factors surrounding the accident, and different title loan lenders will have their own way of dealing with the situation. Here’s an idea of what to expect in potential accident scenarios.

The Other Driver Is Liable for the Accident

Let’s say that you live in one of the many states using a fault system, where the insurance company of the driver who was at fault for the accident must pay for repair costs. The other driver causes the car accident and is therefore liable.

In this case, you would typically get reimbursed for your repairs through the other driver’s insurance company. You’d take your car to a repair shop for an estimate, and then provide that estimate to the insurance company. If your car is declared a total loss, then the insurance company would pay you for the value of the car.

It’s important that you get the full amount for the repairs or the full value of your car if it’s totaled. Insurance companies sometimes try to pay you less. If your car is totaled, they may offer you an amount below the car’s current market value, in which case you should provide evidence that it’s worth more.

Because the title loan company is a lien holder on your car, the insurance company will likely send money to them instead of you. If this money covers what you owed on the title loan, then that will effectively be the end of your loan. If not, you’ll need to pay the rest of what you owe.

An Accident with an Uninsured Motorist

Things get trickier if you’re involved in an accident with an uninsured motorist. Although that party is still liable for the accident, it probably won’t be easy to get the money for your damages. You may need to sue them to receive anything, and even if you get a judgement against them, those can be hard to collect.

If you have uninsured motorist coverage on your insurance policy, then your insurance company will cover the repairs or send a check for the value of your car, if it was totaled. Just like in the previous situation, it’s likely they’ll send the money to the title loan company.

You Caused the Accident

What about if the accident was your fault? Liability insurance is required in every state, and if you have that, it will cover damage to the other party’s vehicle. For damages to your own vehicle, you’ll need comprehensive coverage. If you have that, this will work the same as the previous scenario, with your insurance company sending money to the title loan company.

If you don’t have comprehensive coverage, you obviously won’t be receiving any help with the repair costs of your car, or a check for its value if it was totaled. You’ll still be obligated to pay off your title loan, and the lender will likely want you to pay it off in full because the collateral on the loan is no longer worth what it once was.

What a Title Loan Company Can Do

As mentioned, your lender’s course of action when you get in an accident while owing money on a title loan can vary. The most common outcome is that the title loan company takes any money sent for repair costs or the value of a totaled car by either insurance company, applies that towards the balance of your loan and bills you for any remainder.

If your car isn’t totaled, the title loan company may elect to have you get it repaired using the insurance money, restoring it to its original condition and value. That way, you can continue paying off your title loan as normal, and the lender will still have its collateral on the loan.

You may be able to negotiate a payment schedule with the title loan company instead of paying for the entire amount you owe at once. Lenders can be flexible, especially when you otherwise wouldn’t be able to pay your loan off.

Obviously, you want to avoid any accidents when you’re paying off a title loan, but these things can happen. There’s plenty of additional information about car title loans online here on our site, and if you have any questions or want to get in touch with a lender, just fill out our form. We’ll have one of our loan reps get in touch with you to provide more information right away.