Title loans are a quick and easy way to secure money by putting up your car’s title as collateral.
These loans are based on the value of your vehicle, rather than your credit score, so there is no need to go through the hassle of traditional loan approval.
While these loans may seem like an ideal solution in an emergency, they have high-interest rates and tend to be short-term which makes them difficult to manage.
You also run the risk of having your car repossessed.
It is generally recommended that you get out of a title loan as soon as possible. But how do you do that without losing your car?
Keep reading to get some tips to help you out.
Getting Out Of A Title Loan
It is best to avoid title loans altogether. But if you are in a situation where you find yourself getting one, use these steps to legally get out of it.
Pay Off The Loan
You should always pay off a title loan balance as quickly as possible.
This is often easier said than done, especially because most people enter into a title loan in the first place because they were short on money.
That said, if you are in a position where you could legally gather sufficient funds to pay off the title loan you should do it.
How To Raise Funds To Pay Off The Loan
There are a couple of ways that you can get money to pay off the title loan.
Firstly, you could sell any unwanted property you own. Not only will this help declutter your space, but you may find that you can quickly turn a substantial profit.
You could use social media or a dedicated website to sell your unwanted possessions. You could also have a traditional yard sale.
No one likes doing it, but if it is possible you could try asking family members for some financial help.
Obviously you will pay them back, but they won’t charge the same eye-watering interest rates that you are paying on the title loan.
You also could seek a loan from several family members or friends so that, individually, they are each giving you less than they would if you asked just them.
Be sure to keep thorough records about who loaned you what so that you can pay them back correctly and promptly.
In a similar vein, why not try asking your employer for a pay advance if you are in a position to do so?
A pay advance would be a quick injection of cash after your other monthly expenses have been paid.
The advance would give you an extra bit of wiggle room to pay the outstanding balance on your title loan.
Can’t Pay Off The Loan Immediately? Don’t Panic!
If you have tried the above ways to secure capital but they have not worked, don’t worry. You just need to rethink your approach to your title loan.
It may be possible for you to contact your lender to renegotiate the terms of your title loan. You may not succeed but there is no harm in asking.
If you are not successful in changing the terms of your title loan, it may be an idea to contact your local bank.
The terms of a traditional car loan from a bank will be less onerous than the title loan you have already secured. It may be possible to use a traditional car loan from a bank to pay off the title loan.
However, banks will not lend money to someone with bad credit. You may also find that you cannot qualify for a car loan if you have a title loan against it.
You may need to turn to a credit union or small community bank. These companies tend to have a more relaxed attitude than the big banks.
Remember that even the loans with the highest interest rates from a bank will not be comparable to your title loan – the APR will be substantially lower, meaning the bank’s loan will cost you less.
A traditional car loan will be repayable over several years – usually three to five – which also helps to make these loans more affordable than a title loan.
Can’t Refinance Or Adjust Your Title Loan Terms?
Seeking professional debt management help should be your next port of call if you have not been able to adjust your title loan terms or if refinancing is not a viable option.
Just be sure that you get help from an accredited, nonprofit counseling debt management agency for the best financial advice.
The agency will be able to negotiate on your behalf with any creditors you currently have, including the lender for your car title loan.
You may also find that they implement a debt management plan to help you with the overall state of your finances.
Remember that a debt management plan will not directly affect your credit score. You may find that having a plan in place will reduce the amount of credit that is available to you.
However, making regular repayments to your creditors via a debt management plan will help keep you out of insolvency, reduce your debt, and this will then increase your credit score.
Military Lending Act
It is no secret that title loan lenders disproportionately target those who are serving in any branch of the military.
If you are an active service member, remember that the Military Lending Act affords you, your spouse, and specified dependents legal protections.
This means that any high-risk financial product, including car title loans, is heavily restricted.
Per the Military Lending Act, a lender is prohibited from charging a service member more than 36% APR; charging prepayment penalties; requiring bank account access; requiring repayment of the title loan by check; and asking you to waive some legal rights.
This makes it almost impossible for the lender to make a good profit from your loan, significantly reducing the likelihood that a service member will be targeted.
You may find that you are refused a title loan based solely on the fact that you are protected by the Military Lending Act.
If, however, you already have a title loan with a high APR rate the loan may be voided. This could mean that you keep the money from the title loan and do not need to pay it back.
Check with the relevant authorities for more information.
You should avoid car title loans at all costs as they are a risky financial maneuver.
If you are already in a title loan, you need to get out of it as quickly as possible or you may run the risk of losing your car.
Get out of a title loan by paying it off quickly. There are several options at your disposal to secure credit to pay off the loan immediately.
This includes asking family members to lend you some money, or seeking a traditional bank loan for a car.
Be sure to exhaust these options before seeking debt management advice.
A debt management agency will likely set up a debt management plan for you to follow.
These plans will schedule regular but fairly low repayments to all of your creditors, including the car title loan lender.
Finally, all currently serving military personnel are protected by the Military Lending Act.
The Act means that any high APR interest loan could be voided. Be sure to find accurate advice if you believe you are protected by the Military Lending Act.
Finally, you mustn’t ignore your lender if they try to contact you, especially if you have missed payments. This is vitally important.
Ignoring your lender when you are not adhering to the terms of your title loan contract is a sure-fire way to get your car repossessed.
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