Car title loans are a great way of financing a car if you do not have the money upfront, with some offering better value than others. Sometimes, however, you may need to get out of your car title loan.
Maybe your finances are tight, perhaps something unexpected has cropped up. A job loss, medical expenses, to name a few. Or maybe you want to be free of debt. There are six ways to get out of a car title loan, some easier than others, and they will all depend on your circumstances.
Pay Off Your Debt
The first and most obvious way out is to pay off your debt. Depending on your lender, you can overpay if you can afford it, which depending on the loan reduces the interest you pay, making the loan a better value for you. If you have savings, it may be worth considering paying off your debt with savings, if you are paying more in interest on the loan than you get from your savings, which will usually be the case. Consider this option carefully if you may need liquid savings in the future.
Taking up a temporary second job, freelancing, or even picking up extra shifts at your current job can provide you with the cash required to pay off your loan quicker. This method also ensures you keep a good credit rating.
Refinance Your Title Loan
Refinancing your title loan is a great way to get out of your car title loan. Refinancing can often significantly reduce the interest you pay and ensure your car title is free of finance. If your credit rating is good enough, you could take out a loan with lower interest from a bank, credit union, or even refinance with some 0% credit cards, depending on the deal. Some online peer-to-peer lenders may be worth considering for this purpose.
You can use online comparison sites to check how much interest you will pay for a particular loan to help you shop around. You then pay off the car title loan with the new loan, and can save a boatload in interest, and even have lower monthly payments to boot. This method may also make your car easier to sell. To find companies to refinance your title loan you can check out this article https://www.facethered.com/refinance-title-loan/
Negotiate With the Lender
If you are in financial difficulty, many lenders are often willing to negotiate. Some lenders will negotiate by offering lower monthly payments or freezing of interest. Others will accept full and final settlements of a reduced amount to clear the loan. It is often in the lender’s best interests and yours to avoid court, so these settlements are often considered. Check all the terms and conditions of your loan agreement, which may help you negotiate power, especially if there are financial difficulty clauses in your contract.
Sometimes they will accept the car back and cancel a loan, especially if it is within a cooling-off period some lenders offer. This may or may not affect your credit rating, so this should be discussed with your lender as part of any negotiations, as removing a black mark from your credit report on receipt of agreed payment can sometimes be a negotiating point. Negotiating will involve compromise on both sides, but can often be worth it. It may be worth consulting an attorney if there are terms and conditions points you think may help you negotiate.
Default on the Title Loan
You can stop paying. This is a technique sometimes used in strategic defaults as well, or you may not be able to afford the payments and default anyway. When you default, depending on your jurisdiction and loan terms, interest sometimes stops on defaulted accounts. Defaulting will mean your credit rating carries default markers, making it difficult to obtain credit for up to six years. You can offer to surrender the vehicle as a condition they wipe any remaining balance. If you do not pay the car may be repossessed, and you may still end up owing money.
They could take you to court, possibly garnish your wages for the payments, or put a charge on your house if you have one. Defaulting should therefore be a last resort, though you can use it in combination with negotiations as if they have been trying to get payment out of you for a while, such as a full and final settlement offer. Sometimes you can offer a settlement payment if the lender agrees to remove bad credit markers as a sweetener. A strategic default can in some circumstances give you more negotiating power, especially if you do not have any money. You cannot get blood from a stone, and they will know that.
File for Bankruptcy
This should be a last resort. Depending on your jurisdiction, this will offer limited relief from car loans. It will prevent a civil judgment from being issued against you, but the car can still be repossessed. This can also have a serious effect on your credit rating, and for six years, you will likely be unable to obtain any reasonable form of credit.
Bankruptcy is the ‘nuclear option’ and should only be used if you have many debts compounding the problem, as many car loans can be dealt with much less damage to your finances. The advantage of bankruptcy is it will set you free from your debts in many cases, but you should consult an attorney for advice.
Sell Your Car
Sometimes you can sell your car to pay off the remaining loan balance. If you already have a spare car, access to the transport you need, or are happy downgrading to a basic used car, this can be a great option to clear the balance on loan. You can sell your car on many auction sites or privately, be mindful of selling fees on auction sites.
You can use the sale proceeds to pay off the loan. Some lenders can offer good buybacks, but it is worth considering all options to get the best value for your car as many lenders and dealers will not give you the best possible price. Sometimes if you are in financial difficulty you can negotiate to surrender the car to clear the loan. If you have a second car, consider if you need two cars, you could sell one of them to pay off the loan balance.
The six ways to get out of a car title loan as detailed above are the main ways you can get out of a car title loan. Consider your circumstances and options carefully, and keep in communication with your lender, especially if you have stopped making payments.