Car title loans are an ideal solution to obtain quick cash to navigate an emergency. Applying for online title loans Texas is a smooth and hassle-free process when working with a professional title loan company. Thousands of individuals take out a vehicle title loan in the U.S. each year. You can use the money to cover extra expenses, medical bills, pay rent, or make ends meet until your upcoming paycheck. Once you get approved and receive the loan, you must repay the debt in monthly installments. But what happens if you don’t pay a car title loan?
When considering getting an auto title loan, most borrowers care about how much they will get and how fast. However, making an informed decision before committing to any loan terms is vital. For that, you should also ask about interest rates, potential payoff amounts, monthly finance rates, and processing fees. All those are crucial elements to understanding how car title loans work. A paramount aspect of car title loans or any loan is what happens if you don’t pay your debt in time. Title loans are secured funds advance because they use your car as collateral; the lender puts a lien on your vehicle’s title until you pay off the loan.
Your financial situation can change, or you could find yourself struggling to pay off one of the monthly installments. Seasoned lenders are used to situations like this arising. When agreeing on a loan, ask the company how they proceed when a borrower misses a payment. They should give you all the insight into what happens if you reach such an instance.
What is defaulting on a car title loan?
A loan default happens when the borrower stops making the required payments to the lending institution. What it precisely means to default on an equity car title loan can vary depending on the title lenders, your state’s law regulations, and the precise loan terms you agreed on. Generally speaking, defaulting on a car title loan is not much different from defaulting on a traditional bank loan. You are on default when you fail to make one of the monthly payments; therefore, you have broken your contract. In most cases, the lender will not consider you are on default until you stop praying for several months – typically up to 120 days.
Facing some expensive consequences is what happens if you don’t pay a car title loan quote in time. For example, the lender can charge you extra fees. If you fail to make a payment, your lender can charge you a late fee – a charge imposed on the loan consumer when they miss the due date on a payment. The late fee amount will depend on the title loan company, your loan agreement, and the state’s regulations. Usually, we are talking about $25 to $50, but that amount can vary. Almost all title lenders offer a grace period. That period often lasts 10 to 15 dais, during which you won’t be charged any extra fees for making a late payment – as long as you make the payment in the following days.
Will I damage my credit score be damaged if I don’t pay a title loan?
Since title loans are secured loans, title lenders do not pull your credit report to determine whether or not to grant you a car title loan. That is how you can obtain this type of cash loan even when you have poor credit. Car title loans are the perfect solution to an emergency need for money for individuals without a stellar credit score. With traditional personal or bank credits, when you pay a debt, your credit score goes higher. And whenever you fail a payment, that is negatively reflected in your credit history.
A bad credit score history can affect your life in many ways. For example, with poor credit, it will be more challenging to obtain a house mortgage, loan interest rates can be higher for you, and you will have a harder time renting an apartment.
Because title loan companies do not conduct a credit background check, they do not report your payments or debt to the credit bureau. Your credit score will not get higher or lower with an auto equity loan Texas. However, some title lenders may report your payments to the credit bureau if you ask them to; that is a way to improve your credit report.
Can a lender repossess my vehicle?
Car repossession is one possibility of what happens if you don’t pay a car title loan. If you fail to make the payments and default on the loan agreement, a title loan lender has the right to repossess your car. When you take a car title loan, you give your vehicle’s title to the lender as collateral. Or the lending company can put a lien on the title. Once you fully pay your debt, you get back the vehicle’s title, or the lender removes the lien. Therefore, the lending company has the legal right to repossess your car if you stop making the payments and avoid communication with the lender.
In the state of Texas, if you miss a payment, a lender can repossess your car after the grace period without prior notice. Repossession of your vehicle is the worst possible scenario when taking a car title loan. Any honest and properly licensed lender will try to avoid taking this step. Instead, they will talk with you and attempt to agree on a new repayment plan. That is why you should always keep open communication with your lender, especially if you struggle to meet the monthly payments.
When you fail to repay your debt, the lender can take your vehicle and sell it at auction to cover the funds. If this unfortunate situation happens, you must keep in mind that you could be charged with repossession fees. Repossession fees can include the following:
- Towing and storage fees
- Public auction fees
- City or county fees
- Court fees
- Attorney fees
- Late payment fees
Repossession fees can add up quickly, causing your debt to increase. There are many ways to avoid car repossession, such as speaking to a debt management agent. The best option should always be reaching out to your lender and working on a new agreement.
Can I regain possession of my car?
After repossession, it’s still possible to get your car back as long as you make a payment for the full debt – including the repossession fees we mentioned above. That is known as exercising your right to redemption. You can redeem your vehicle at any time prior to the auction or sale. The lending company will send you a letter to notify you about this and give you all the information you need to redeem. If the lender has not contacted you within five days after the repossession, reach out immediately and ask for the payoff amount.
Ways to avoid a car repossession process
Now you know the worst possible outcome of what happens if you don’t pay a car title loan. The best you can do is carefully think if you’ll be able to repay the funds before applying for a title loan. If you, at any point, find it challenging to meet the payments, don’t panic. You can take action and avoid repossession by following any of these tips:
Talk to your lender
As mentioned, professional lenders do not want to repossess their client’s vehicles. They would much rather you pay the loan than take your car. Therefore, just like you, they will try to find a way around this unfortunate situation. That is why you should maintain contact with the lender and document all the communication. Inform them right away if your financial situation changes and you need a few more days/weeks to pay the installment. You can also agree on new terms and conditions that are more favorable for your current situation.
Get a title loan buyout
You can take a loan buyout if you have a title loan and are struggling financially. You can get a new loan from a different title loan company. The new lender can buy your existing loan, pay for it, and you may even qualify to get extra funds. Title loans buyout Texas are very similar to refinancing a loan. But while a title loan refinancing is between the borrower and the original lender, a buyout happens between two title loan companies.
Refinancing
Another option is talking to your lender and getting a loan refinancing. With this alternative, you can change the terms and conditions of your loans and get a deal that better suits your current situation. For example, you can agree on lower monthly installments over a longer period.