As helpful as title loans can be, especially for borrowers who don’t have the best credit and have very few other loan options, there’s also a risk involved if the borrower doesn’t have a plan to repay the loan. If you end up in this situation, it could lead to a cycle of title loan […]
As helpful as title loans can be, especially for borrowers who don’t have the best credit and have very few other loan options, there’s also a risk involved if the borrower doesn’t have a plan to repay the loan. If you end up in this situation, it could lead to a cycle of title loan debt where your loan principal stays the same while you keep making interest payments to keep the loan going.
One way you can clear this hurdle and get the title loan help you need is with a buyout program. A title loan buyout is when one lender pays off your original title loan company for you, and you then pay that new lender. When done correctly, this can save you money. Here’s how you can make it work for you.
How a Title Loan Buyout Works
Before getting into the title loan buyout process, it’s important to fully understand everything that goes on when you get a title loan.
Your title loan is a secured loan taken against your car. To get one, you must own the car outright and have its title. The title must not have a lienholder on it, and your name needs to be on the title.
The reason that there can’t be a lienholder on the title is because when you get a title loan, the lender becomes the lienholder. There can only be one lienholder on a car title at any one time.
When you get the title loan, there will be a few important details to note:
- The length of the term, usually 30 days
- The interest rate which varies by state and lender
- The total amount due.
Now, if you have a title loan that you haven’t been able to pay back and it has a high interest rate, you can look for buyout options. This is essentially a way of getting title loan help by refinancing.
To do this, you’ll look for a title loan buyout company. Many title loan companies will also offer this service, and we can find them for you in our network of lenders. You’ll provide the lender with some basic information just like you would if you were applying for a title loan.
The lender will evaluate your situation, and then determine what interest rate it could offer you. If you agree to the buyout, then this lender will go to your original title loan company and pay the entire amount you owe on your title loan. At that point, the new lender becomes the lienholder on your car title.
Benefits of a Buyout
The main way that you benefit when you have a lender buy out your title loan is that you can secure a lower interest rate and spend less money paying the loan back.
For example, let’s say that you originally got a $1,000 title loan that has interest of 23 percent each month. You then find a lender willing to buy out your title loan and give you an interest rate of 15 percent per month. You’re saving 8 percent per month, which is $80 on a $1,000 title loan. If it takes you six months to pay off your loan, that’s almost $500 in savings.
Deciding if a Buyout Is Right for You
A buyout can be convenient, but only in the right situation. You should ask yourself the following questions before you pull the trigger on a buyout:
- How much longer would it take you to pay off your original title loan?
- What will the interest rate difference be between your original title loan and your refinanced title loan?
- How much do you have left to pay on your original title loan?
The point of all these questions is to decide whether the money you could save with a title loan buyout would be worth going to a new lender to set it all up. It’s not difficult to get your buyout, as the process is almost as quick and simple as getting a title loan in the first place.
But still, it doesn’t make much sense to go through the effort of refinancing your title loan with a new lender if you won’t save a substantial amount in interest, either because the interest rate difference isn’t that much or because you’ve already almost paid off your original title loan.
If you could realistically pay off your original loan within the next month or two, it’s typically also better to just do that instead of going through the buyout process.
Weighing Your Options
Think you may need title loan help with a buyout? We can help you find the right lender. All you need to do is fill out our simple online application with your car’s info and your basic contact info. One of our helpful representatives will get in touch shortly to go over your buyout options and answer any more questions about title loans you have. You could have your title loan refinanced by the end of the day.
Car Title Loan Laws by State
Vehicle title loans — sometimes called car equity loans — are secured loans that use the title to a car you own as collateral. Title loans are unique for two major reasons:
- You don’t need to be employed. You do need income, but it can be from an alternate source like disability payments or unemployment insurance.
- You don’t need to have good credit. Nearly all car title loan companies skip the credit check. This means you can qualify with poor credit, slow credit and no credit.
Auto Title Loan Laws by State
Title loan lending is governed at the state level, which means each state writes its own laws about how title lending can be operated. At the time this article is being written, title loans are legal in 21 states, according to the Center for Responsible Lending.
Laws vary by state. Some states regulate how much interest can be charged, like in Florida. Others state that lenders must clearly display interest rates and finance charges in their offices, like in Texas and South Carolina.
Many people worry, “What happens if I don’t pay a title loan?” In most states, the lender can take your car and sell it recover costs. States like Virginia require lenders to pay any amount recovered during the sale that is above the costs of the loan.