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It is undeniable that going into debt is much easier than paying it off, and many people lose their property as a result of a failure to make timely payments. Obtaining a title loan is a simple and quick way to manage your finances, but only if you are able to repay the loan amount within the agreed-upon time frame. Continue reading to learn how to repay and legally get out of a title loan.
What is a Title Loan?
If you need cash immediately for a short amount of time, you may be tempted to take out a car title loan, which typically ranges from 25% to 50% of the value of your vehicle.
A car title loan is a short-term loan that requires you to use the title of your car to guarantee repayment as part of the loan agreement. A typical car title loan has a high yearly interest rate, expects payment within 30 days, and is for a fraction of the car’s value. The lender will check your vehicle and, based on the results of that inspection, may grant you a loan for a portion of its worth. If you don’t pay back the loan in the time allotted, the lender may repossess your vehicle or offer to “rollover” the debt into a new one, for instance, a second chance payday loan, etc. However, you are adding more fees and interest to the amount you already owe, which can lead to a costly borrowing cycle.
If you’re trapped trying to figure out how to get out of a title loan you have a few options to consider. Paying out a title loan, or any loan is the simplest and most successful method to get out of it. However, the fact that you don’t know where to get the money is likely the reason you’re in this situation in the first place.
Here are some ideas on how to get out of a title loan without losing your car.
Ways to Get out of a Title Loan Without Losing Car
- Negotiate your loan terms
The first step is to contact your title loan lender and request a renegotiation of your conditions. Don’t ignore the lender; he or she will use all available means to track down your vehicle.
If you’ve previously missed a few payments, your lender may be prepared to lower your interest and fees. This could significantly reduce the amount of money you have to pay back on your loan.
Many borrowers believe this isn’t doable, but it’s worth a shot. You’ll have a clearer understanding of how much money you’ll need to pay it off in full after renegotiating your conditions with your lender.
- Refinance and reconsolidate your loan
You can also refinance your title loan with a different loan to get rid of it. This won’t solve the main issue but it will help to stop the frustration.
Taking out a fixed-rate loan from a bank, credit union, or online lender is often less expensive than rolling your title loan over month after month. Even just a comfort check from your credit card can help you save money (as long as you’re sure you’ll pay it off before any promotions expire), and you’ll be able to keep your title.
If you’re having trouble getting a replacement loan, go to a small local bank, credit union, or check online loan networks where you’re more likely to be approved. Peer-to-peer lending sites are also worth investigating.
- Ask for a salary in advance
If you have a job, consider requesting a salary advance from your supervisor. Getting a salary advance usually does not come with any interest. You can also offer to work for a longer period of time to earn more money.
Explain to your boss that the money will be used to pay off a car title loan. Because you rely on your car for work, your employer may be more sympathetic to your financial situation.
Another alternative is to simply stop paying, but you should think about the consequences carefully before doing so. If you default on a loan, your credit will be damaged, and your lender will eventually repossess your vehicle. As a result, you’ll have bad credit and no car, and you’ll almost certainly owe the money. Offering to surrender your car willingly can help, but you’ll still have poorer credit scores. On the other hand, you’ll be free of monthly payments, which may be sufficient to improve your financial situation.
- Sell your car and get a cheaper one
Rather than defaulting on your title loan, consider selling your automobile, paying off the debt, and then purchasing a less expensive model. Because your title and a copy of your keys are with the lender, finding a legitimate buyer may be difficult, but it is still possible. This option is viable if you have a recent automobile model that you can still sell for a profit, and the amount you could sell it for is significantly higher than the amount you owe the title loan lender.
- Sell some jewels or properties
Make a list of everything you own, including valuables, and see what you can sell. Use online second-hand platforms and social media groups to sell stuff, clothing, books, bags, musical instruments, and other items.
Simply ask yourself if the thing is more important than your car while deciding what to sell. Concentrate on large furniture, gadgets, old cell phones, or luxury goods in your closet.
- Try to apply for a traditional car loan
If you are unable to repay the debt, you may wish to obtain a traditional auto loan and use it to repay your title loan. A traditional car loan, unlike a title loan, is obtained from a respectable source such as your local bank. They feature competitive prices and term durations ranging from a few months to several years.
These loans are far less difficult to repay than a title loan. The bad thing is that you’ll need strong credit and a late-model vehicle in order to qualify.
Some auto loans aren’t funded right away, and some have interest rates that are similar to what you’re paying now, but everything you can do to avoid a title loan is worth checking into. If you’re on the fence, it’s not a bad idea to call your bank and see what they can do.
- Get a personal loan
Applying for a personal loan is also a possibility. Contrary to belief, if you have some sort of collateral, you may not need a good credit score to get a personal loan. A personal loan typically lasts at least five years, giving you plenty of time to pay off your obligations.
A personal loan is unique in that it is not tied to a specific car. That means you can pay off your title loan and sell your automobile whenever you want to use the money for something else.
- Use your credit card cash advance
Since most auto title loans are only for a few thousand dollars, you may be able to pay it off by taking out a cash advance on your credit card. While credit cards normally have a high-interest rate on all cash advances, if you don’t have outstanding credit and can’t acquire another loan, this strategy may be a viable option.
- Borrow money from family or friends
You haven’t been able to secure a loan from a bank or a new lender? If everything fails and you’re about to lose your car, you might always try to borrow money from a friend or family member. Although it may be humiliating to ask, most individuals who care about you will want to assist once they grasp the circumstances. It doesn’t harm to ask, even if they aren’t in a financial position to help you.
If they agree to let you borrow money, make sure you establish rigorous repayment limits and pay them interest as a favor. After all, the value of your connection outweighs the value of any amount of money.
- Apply for a home refinance loan.
You may be able to qualify for a home refinance loan if you own a home and have some equity. These have lower interest rates and can provide you with a substantial sum of money. However, because the cash can take up to 30 days to arrive, this may not be the best option for everyone.
If, on the other hand, you have a lot of debt to pay off in addition to the auto title loan, this is one of the best methods to do it all at once.
- Military Lending Act
The Military Lending Act may also provide you with additional protections (MLA). Active-duty service members, as well as their wives, dependents, and others, are covered by this federal law. Even if you are not in the military, if your spouse or parent is, you may be eligible for these benefits.
A title loan may not have interest rates of more than 36 percent for those who qualify, according to the Military Lending Act. Furthermore, if they repay their debt early, lenders may not punish them. These safeguards can go a long way toward making your payments more manageable and assisting you in paying off your loan faster.
Can Title Loans Impact Your Credit?
Because lenders don’t normally run your credit information or report your payments to the credit bureaus, title loans may have no effect on your credit. That means that paying your title loan balance on time will not help you build credit or boost your credit scores.
However, not paying your title loan can be costly in a number of ways. To begin with, you run the risk of having your car repossessed. If you don’t pay what you committed to, the lender has the authority to get it because you put this up as collateral.
You might be able to extend the loan, but you’ll almost certainly be charged expensive late fees if you don’t pay on time — assuming that’s even a possibility. You may be charged additional fees under titles like application fees or processing fees, and you may even be asked to purchase an emergency roadside package.
Failure to pay can hurt your credit since the lender can report any missing payments or defaults to the credit agencies. Negative marks on your credit report might last up to seven years.
Consider less expensive options before taking out a car title loan. If it’s your only alternative for quick cash, shop around for the best APR and only borrow what you can afford to repay within the loan term.
In the meantime, concentrate on improving your credit and creating a budget. Also, contact a financial advisor to help you manage your debt and create a budget, so you don’t end up needing a car title loan down the line.