So you’ve probably seen ads about these easy-to-get loans and heard horror stories about what could happen if someone defaults on their loan. Yes, title loans (also known as title pawns in some states) can be intimidating — especially if you don’t fully understand how these loans work or if you think there’s a chance you might default. However, we want to make sure you leave well equipped with the ins and outs of the title loan process and offer tips and alternatives in case you find yourself in a sticky situation.
Understanding Title Loans and Lenders
Just to make sure we’re on the same page, it’s important that we first define what exactly is a title loan. A title loan is when the borrower uses their motor vehicle title as collateral in order to secure a loan. In addition to a title loan on a car, some lenders also offer loans on other vehicles including ATVs, motorcycles, boats, RVs, commercial vehicles, construction equipment, landscaping equipment, and logging equipment, etc.
Title loans are usually for a 30 day term and borrowers must repay the loan balance in full plus the interest in order to redeem their title. Or they can choose to renew the loan for another 30 days by paying the title loan fee only.
When it comes to title loans, the truth is: lenders do not want you to lose your car and they do not want your car. Lenders want their money, and sometimes as a last resort they have to repossess your vehicle in order to recuperate the money they lent you if you default on a title secured loan.
How to Remain in Good Standing
As long as you are paying the note, the company will not come get your car. However, if you think you may be late on your payment, if something financially comes up unexpectedly, or if you think you may end up defaulting on your title loan, it’s important that you remain in good communication with your lender. In most cases, the lender will work with you to help you get back on track with your payments, so staying in touch with them and remaining in good communication is key. Plus, paying your loan is much cheaper than getting your car back from the repo man.
What If You Can’t Repay Your Loan
If you are absolutely unable to make your payments, the best step for you as a consumer is to surrender your vehicle to the lender. A voluntary surrender is better for your credit than repossession.
Some loan products have laws that require the lender to return money to the consumer if the vehicle is sold for more than the amount due. If you think your car may be repossessed, do not trash or strip the vehicle. The lender lends money based on the condition your vehicle was in the day you got the loan. If the company has to pay to have it repossessed and repair or replace things you have destroyed or taken, it will result in less money back to you.
What Happens if You Default
According to reports done by the Consumer Financial Protection Bureau, about 80% of all title loans do not go into default. On the flip side, that means about 20% of these loans do. If you as a consumer do not pay what you owe, and if you do not surrender your vehicle, your vehicle can face repossession.
Modern technology has now enabled those in the repo profession with the ability to track and repossess any vehicle anywhere in the country. Today, lenders use GPS tracking devices and cameras that mount onto trucks to take pictures of license plates that automatically upload to a central database. The databases show key tracking information like where you have your vehicle serviced or where you bought your tag. With this technology, all a lender has to do is place your vehicle out for repossession with one company and that company can access tracking information using the above mentioned technology.
If you need help coming up with extra cash prior to getting a title loan (or if you need help repaying your loan), here are a few alternatives that may assist you in either situation during your time of need.
Alternatives to title loans:
- Auto Installment Loans – Although similar to title loans, when you use the title of your vehicle to secure an auto installment loan for up to $15,000 (or more), rather than repaying the loan all at once within 30 days, you repay this credit based loan in increments over a set period of time usually anywhere between 3 and 36 months.
- Personal or Installment Loans – With a personal or unsecured installment loan, the loan limit varies from state to state and company to company, but usually start in the hundreds and may go up to $1,500 (or more). Although these are usually harder to get than secured loans since they are primarily based on credit and certain underwriting criteria, personal and installment loans offer great flexibility to help during your time of need.
For help repaying your loan:
- Pawn Loans (or Sell Your Items Outright) – Whether you’re looking to come up with a quick $100 or a few thousand, there may be items in your home you can gather altogether to get a pawn loan (or sell outright) to cover your big expense. Pawn shops usually always buy or pawn brand named items and popular merchandise currently in demand like jewelry, firearms, or tools to name a few. Pawn shops like Quik Pawn also pays top dollar for your broken or unwanted gold if you have that laying around your house too.
All and all, it’s important to remember that while lenders want to do what they can to help you during your time of need, you should also do what you can to remain in good standing with the company. Remember, lenders do not want your vehicle. They’d rather have the loan repaid. By continuing to communicate with your lenders, making sure that you pay your obligation, and doing what you can to not be “too” late, you should be able to minimize the impact if you fall on hard times when repaying your loan.
Getting a handle on your finances takes time, and Always Money understands. For over 20 years, customers have trusted Always Money to provide them with affordable short-term loans to meet their immediate needs, and so can you! If you’re in a jam and need immediate help, any of Always Money’s loan options may be just what you need to get you going in the right direction. If you have questions about our title pawn loans or if have any questions about our additional loan options, visit www.alwaysmoney.com or call 1-855-GO-ALWAYS (462-5929) for the help you need today.