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What Happens if Someone Defaults on Their Car Title Loan?

By MattJones

TNL Car title loans feels it is important to educate potential borrowers what can happen if they take out a title loan and do not pay the loan.  First, we work with several lenders and their policies differ.  In most cases a lender will want to work with you because they do not want to take the time to repossess your car.  This costs the lender money to get your car, file paperwork, and then to re-sell it at an auction.  The lender is better off if you continue to make payments.  

Watch the video or read the article below.

There are many different ways to borrow money in the financial industry.  There are pros and cons to each way.  When an individual uses a car, pickup truck, or suv to borrow money they own they are using that vehicle as collateral.  This is called a “car title loan’ or a “vehicle collateral loan” or a “pink slip loan.”  

There are many different reasons people take out a title loan.  Sometimes it is due to fight off foreclosure, or unpaid bills, a financial emergency, or medical bills.  In almost every case the borrower needs money quickly–and that is one of the benefits of an auto title loan.

Another benefit of a car title loan is that borrowers may be able to still get a loan even if they have poor credit.  The loan is generally based off of the equity you have in your vehicle.    

What is a Default on a car title loan?

A default is when the borrower does not follow through on the terms that have been agreed to by the lender and the borrower.  One example of this is when a borrower fails to make a payment.  Another example is when a borrower doesn’t pay the full amount of the monthly payment.  Yet another example of a car title loan default is if the borrower attempts to do something that is prohibited by the agreement.

In the event of the default the lenders that TNL Car title loans work with can decide if they want to work with you. Many times the lender can customize a payment plan for you, but this is not guaranteed.  

What Happens if a Borrower Defaults on their Auto Title Loan?

How a car title loan works, technically, is that a person gives the lender the title to their vehicle and then the lender will sign on as the lien holder of the vehicle’s title.  This, effectively, makes the company who has been put on the title the owner of that vehicle.  This is based upon a contract and an agreed-upon amount of money, which is the loan amount that much be paid back with interest.  There is a predetermined monthly payment that the borrower is to pay as the standard minimum payment—but borrowers are able to pay off the loan early without a prepayment penalty.  

If you (the borrower) default on your title loan, the lender can repo the vehicle, or the lender can charge late fees or penalties and add these to the loan.

Most lenders that The Net Lender works do not want to repossess your vehicle.  Why?  Because repossessing a car takes time, energy, and money.  It is easier, and much better for the lender to work out a payment plan.  This doesn’t mean that a repossession never happens, but that most lenders prefer to continue to earn interest.

What Happens if a Car is Repossessed?

The best answer here is, it depends.  If the borrower is able to pay the lender the money they ow within a certain period, they can sometimes get the car back.  In some cases if the lender does decide to repossess a vehicle, then they may be required to send the borrower a repossession notice prior to attempt to repossess the vehicle.  In most cases if a lender repossess a borrower’s car the lender will auction off the car.  If the lender gets more money at auction than the value of the car and the loan’s outstanding balance plus fees, then the lender is required to return those excess feeds to the borrower who defaulted on the loan.  Of course, it is rare that this happens as cars sold at an auction typically go for less than the loan amount.

Whatever the case, if you find yourself behind on payments or struggling to make your payments the first thing you need to do is to call your lender and explain your situation.  The best thing you can do is always have open communication.  Never shut yourself off, and never ignore or disregard your lender if they call or contact you. Communicating can always lead to a better outcome.

 

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Kim Redding

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Getting a title loan was significantly easier than I anticipated. Bryan was really knowledgeable and walked me through the method with ease. If I’m ever in a tough position again, I’m confident that they may be able to help me out! Incredibly nice and very helpful!

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