Car Stolen During A Title Loan It’s never easy when you’re the victim of a car theft. Not only can this put you in a tough spot financially, but it’s also a huge inconvenience, as you need to find alternate methods of transportation until you sort the situation out. And the financial aspect of it […]
Car Stolen During A Title Loan
It’s never easy when you’re the victim of a car theft. Not only can this put you in a tough spot financially, but it’s also a huge inconvenience, as you need to find alternate methods of transportation until you sort the situation out. And the financial aspect of it will be even more challenging if you get your car stolen while paying for a title loan.
How will a car theft affect your title loan? This will depend quite a bit on your insurance coverage and the title loan company, but there are a few important things to understand if you find yourself in this situation.
A Stolen Car Doesn’t Change the Amount You Owe
When you get a title loan, you’re taking out a loan against the value of your car and providing your title to the lender as collateral. The title loan company has the right to repossess your car if you fail to fulfill the terms of your agreement.
You will still owe the full title loan balance if you get your car stolen because the title loan company held up their end of the agreement by issuing your loan. The balance will include:
- The amount that you borrowed from the title loan company
- Any interest charges and fees incurred on the loan
The Title Loan Company May Want You to Pay the Loan Off Immediately
The amount you borrow with a title loan is based on the value of your car. The title loan company will go through the following process to determine how much to lend you:
- Plug the details of your car, including its year, make, model, style and mileage, into a vehicle value site.
- Perform a short physical inspection of your car to evaluate its condition.
- Compare the condition of your car to the value listed for that condition in the vehicle value site to determine the current market value of your car.
- Lend you a portion of this value, with most lenders issuing loans with maximum amounts between 30 and 50 percent of the car’s value.
Because the loan amount is based on the car’s current value when you bring it in, you wouldn’t be able to get a title loan on a totaled car. The lender needs something they can repossess and sell if you default on the loan, as otherwise, they’d be taking a huge risk.
If you get your car stolen while paying for a title loan, it’s a similar situation to when you have a car accident while owing title loan money. The collateral on the loan no longer has the same amount of value – if the car is stolen, there’s obviously no value, because the lender has nothing to repossess. If the car is damaged in an accident, its value is diminished.
Because the lender won’t have the same level of security on the loan, they may want you to immediately pay the full balance.
Comprehensive Insurance Coverage Can Help
Hindsight is always 20/20, but situations like these are one reason why it’s smart to have comprehensive insurance coverage. Let’s say that your car is stolen and you only have the minimum liability insurance. You then need to hope that the police find your car and it’s undamaged. Otherwise, you no longer have your vehicle, and you’re still on the hook for the full title loan amount.
If you have comprehensive insurance coverage, your insurance company pays you for your car’s value if it’s stolen and can’t be recovered, or pays for repairs if your car is recovered but was damaged during the theft.
Since the title loan company will be the lienholder on your car, the insurance company may send them the check for your car’s value. In that case, the title loan company would apply that amount towards your loan balance. If you still owed anything, you would still be responsible for paying that.
You May Be Able to Settle What You Owe
It’s understandable that you may not have enough money to pay your title loan in full right away, especially when you’re already dealing with the inconvenience of a stolen car. It may be possible to settle your title loan debt for a lower amount.
This will depend heavily on your lender, but it’s worth making a settlement offer if you can’t pay your balance in full. It’s in yours and your lender’s best interests to settle the matter yourselves. If you can’t, the lender may sell the debt to a collection agency. That looks bad on your credit history, but it also means the lender is getting pennies on the dollar for the debt.
Let your lender know right away if your car is stolen and see what your options are. You may be able to pay a smaller amount, such as just the remaining loan principal without any fees. Or you could work out a payment plan. It’s worth a shot when you’re already in a tight spot financially.
