Take note that your credit score could still be affected if the lender reports the settlement to credit agencies. Make sure the new payoff amount is in writing and get things settled quickly. They might be willing to allow you to pay back less than initially agreed upon following some negotiation. If you don't have the money to pay off the loan, then talk to your lender. Just keep an eye on the loan status and make sure that it is properly closed. If you've got the money though, then contacting the lender and asking them for a payoff amount to pay everything off could prevent defaulting on the loan. Paying off the loan is probably the least feasible option if you are having financial problems. There are ways to get out of your title loan, but they all involve talking to the lender and finding a compromise. So, with the previous example, if the car sold for only $3,000, you may have to put up the other $2,000. It can work against you, though, as you may have to make up the balance if the car doesn't cover the remaining costs. The lender may be legally required to provide you with the extra $2,000. The lender repossesses the car and auctions it for $7,000. Let's say that you owed $5,000 in principal, interest, and repossession fees. You may be entitled to extra money if the sale settles your debt. If you aren't able to do that though, then the lender is fully entitled to take the car and sell it to recover any losses. You may be able to reclaim the vehicle before it is sold off by paying the loan in full. You have a few options open to you if your car is repossessed. If the lender feels that you have done this, they can claim a breach of the contract and find other legal means to take possession of the car, including bringing in law enforcement. It is illegal for you to hide your car so that they can't find and repossess it. Some states require a lender to notify you about defaults within several weeks, but others allow lenders to appear and tow the car away whenever they want. The specifics of the repossession process varies by state. Defaulting on the loan will often result in the vehicle being repossessed and auctioned to cover the cost of the loan. If a lender repossesses your vehicle, you could be hit with fees to cover the attorney and storage costs.Ī title loan uses your vehicle title as collateral. Individual states have a cap on how much you can be charged for fees, while others allow lenders to charge as much as they want for anything they want. The fees for a missed payment or repossession depend on state regulations. It affects your ability to get new financing and can even make it harder for you to find a job. If you aren't able to make payments on your title loan on time, then it could lead to some expensive consequences. What Happens if You Default on a Title Loan? If you are upfront about what you need from them, they are willing to listen, and you might be able to work out a deal. They would instead give you the chance to pay off the title loan. Your lender may be willing to work out a new repayment plan or even redefine the terms of the loan to give you more time to pay it back.ĭefaulting can cost lenders a lot of money too. If you are worried about defaulting, then be sure to talk to the customer service team of the lender as soon as you can. At that point, the lender could legally repossess the car to pay off the title loan. It means that you have broken the contract. In general, a loan is in default when you don't make your payments on time or not all. What exactly constitutes as defaulting on a title loan the laws can vary from state to state. Let's look at what happens when you default on a title loan. If you are falling behind on your title loan payments and are worried about defaulting, then it's possible to get out of the title loan early. It will reduce your chance of being approved for credit in the future.

Car defaults