... & press enter to start

photo of a red mercedes in the bed of a tow truck

What is Title Loan Repossession? If you’ve been considering getting a car title loan, you may have had friends or family members caution you against it. “You’re going to lose your car!” they may have said. Many believe that title loan repossession happens to everyone who gets a vehicle title loan, even those who get […]

What is Title Loan Repossession?

If you’ve been considering getting a car title loan, you may have had friends or family members caution you against it. “You’re going to lose your car!” they may have said. Many believe that title loan repossession happens to everyone who gets a vehicle title loan, even those who get title loans for older cars.

It’s true that repossession is a possible outcome of getting a title loan, as this article by the Federal Trade Commission points out. But to put this in perspective, think about this: repossession is also a possible outcome of buying a car, just like foreclosure is a possible outcome of buying a house. Repossession only happens when you don’t make your payments and you don’t make an effort to approach your lender for help.

Before we go any further, let’s answer a question: what, exactly, is title loan repossession?

A car title loan is a unique form of credit because it doesn’t require a credit check and, in many cases, you don’t even have to be working to qualify. As long as you have some form of income, such as from disability or unemployment, you can get approved. It’s a perfect solution for people who have made credit mistakes and have been turned down by other creditors. What you do need to have is a fully paid for car with a title in your name.

You see, car title loans — also called car equity loans and pink slip loans — are a type of secured loan. Your car title acts as collateral to secure the loan. That means you’re putting up something of value — your car — in order to get a loan without a credit check. If you make all of your payments, your lender will return your title to you and your account will be closed. But if you default on your loan, your lender has the right to take possession of your car and sell it to recover his losses.

Are Title Loans Legal?

Each state determines whether or not title loans are a legal form of credit. According to the Consumer Federation of America, title loans are legal in 17 states and can operate in another four if the lenders follow certain rules.

Title loan repossessions are legal in each of these states. They are an unfortunate consequence of mismanaging your car title loan payment plan. But they are certainly avoidable. Keep reading to find out how.

Staying on Top of Your Title Loan

Getting car title loans is easy. This is meant to be a good thing for people with poor credit who are struggling financially because traditional lenders won’t work with them. However, it can be a drawback if you go into the loan blindly.

You typically start the application online with a free car title loan quote. By plugging in your car’s information, like its make, model, age and mileage, the title lender’s website will automatically generate a quote based on your car’s value. If you have a newer, nicer car, you may qualify for thousands of dollars. Herein lies a problem: if you qualify for $7,000 but only really need $1,500, you shouldn’t borrow the full amount. You’re getting in over your head if you do.

To get the quote, you’ll also need to plug in your contact information. Shortly after your quote is presented on-screen, you’ll get a call from a loan representative who will ask if you’d like to continue with the full application.

If you do, you’ll be asked for the following information:

  • a copy of your photo I.D.
  • proof of your address (a bill or lease agreement)
  • proof of income (pay stubs or bank statements)
  • the original car title

Depending on the lender, you may also need to provide a list of personal references, a copy of the ignition key and proof of registration and insurance.

In most cases, you’ll need to visit the storefront nearest you to sign your loan documents, hand over the title and pick up your money. While you’re there, the specifics of the repayment plan will be explained to you in detail. Make sure you understand your obligations! Ask questions. Read your documents. Make sure you have the money to make your payments.

Avoiding Trouble

Seeing big dollar signs may tempt you to borrow more than you need. If you have more than one car, get a title loan on the older one. In most cases, you’ll get less money for an older car, which will help curb your spending.

Make all of your payments on-time. If you get into trouble, call the lender ahead of time to let him know what’s going on. Work with him to set up a new payment plan so you don’t get off-track.

Title Loan FAQ

  1. How old do you have to be to get a title loan? At least 18 years old.
  2. What if I lost my title? Visit your DMV for a duplicate. There is a fee associated.
  3. Can I get a loan on my mom’s car? The title must be in your own name.
  4. What if someone else’s name is on the title with mine? Both of you will have to apply for the loan.
  5. What if I have bad credit? What if I’m not working? You can still qualify for a title loan. Title lenders never check credit, and as long as you have some form of income, you can be approved.
  6. Can I get a loan if the car isn’t paid off? Some lenders will work with you if you only have one or two payments left.

Tips For Title Loan Relief

Title loans are like a comfortable bed. They can be really easy to get into and hard to get out of. If you find yourself trapped in a title loan repayment plan that you cannot afford, there are some options for you before facing the consequences of a title loan repossession. Below are two options for getting past this title loan dilemma.

Ideal Solution

In most cases, it is in your best interest to find a way to pay the title loan. If you cannot, you might be able to work with the lender in order to come up with a better payment plan you can afford.

Swap Out The Car

If worst comes to worst, you could sell your car in order to pay back your loan. In some instances, this may be a better option than having to get your vehicle repossessed. However, selling might be a little difficult if you don’t have a clean title.

Other Options

Another option could be to downgrade to a more modest vehicle in order to save money on interest, fees and monthly payments. This could free up some of your monthly budget in order to afford your title loan payments. Another easy way to get rid of your title loan is to replace it with another loan. If you can get a low-interest personal loan to pay off your title loan, you could save a lot of money in interest.

About author
Author's gravatar