Do you know that 20% of title loans result in the repossession of a borrower’s vehicle? Yes, that means 1 in 5 people who get title loans loses their car because they are unable to repay the debt owed. A lot of times, many car owners who take out title loans do it because it’s the easiest way to get fast cash. You may have done this as well thinking that this is your only option.
If you recently took out a car title loan and you’re afraid that you’re going to lose your car sooner or later, there are numerous ways on how you can legally get out of a title loan.
9 Ways on How to Legally Get Out of a Title Loan
If you’re stuck on how to get out of a TitleMax loan or any other car title loan from a lending company, there are different options that you can explore to get a title loan relief. The easiest and most effective way to get out of a title loan or any loan for that matter is to pay it off.
However, the reason you’re probably in this jam in the first place is because you don’t know where to get that money from.
Here are some ideas on what you can do to avoid losing your car because of your title loan.
1. Renegotiate Your Terms
The first step before doing anything else is to go to your title loan lender and try to renegotiate your terms. Don’t hide or ignore the lender because the lender will exhaust methods to still locate your car.
If you’ve missed a number of payments already, your lender may be willing to reduce the interest and fees. This could help a lot in lowering the total loan amount that you need to pay.
Many borrowers think that this may not be possible but it’s worth trying. As the old cliché goes: “If you don’t ask, you don’t get”. After renegotiating your terms with your lender, you’ll now have a better idea of how much money you need to come up with to pay it off in full.
2. Get a Salary Advance to Pay Off the Loan in Full
If you are employed, consider asking your boss for a salary advance. Getting a salary advance will typically not have any interest. You can also offer to work over time to get more money.
Be transparent with your employer and explain that the money will go towards paying off a car title loan. Since you need your car for work, your boss might be more understanding that you cannot afford to lose your car.
3. Sell Some Property or Valuables
Take an inventory of all the property or valuables that you have and see what you can sell. Take advantage of online second-hand platforms and Facebook groups where you can sell furniture, clothes, books, bags, musical instruments, etc.
When choosing what to sell, just ask yourself whether that item is more important than your car. Focus on big furniture, electronics, old cell phones, or luxury items that may be hiding in your closet.
4. Raise Money Quickly
Don’t have any valuables to sell? Getting a side gig is a legitimate way to earn money. One obvious option is to work as a rideshare driver or a delivery driver while you still have your car. These gigs usually pay around $25 per hour. Working 4 hours a day doing these gigs could get you $100 a day plus tips. In a couple of weeks, you can raise the money to pay your car title loan amount in full.
Other high-paying side gigs that you can try to apply for include being a handyman, cleaning houses, dog walker, and house sitter. These jobs will pay you from $30 to $50 dollars an hour.
If you have a spare room or even a spare bed in your house, this might be the time to offer your extra space for rent. Getting a roommate is one of the fastest ways to earn good money enough to pay for your car title loan.
5. Get a Credit Card Advance
If you still have room in your credit card, getting a cash advance to pay off the loan in full can be one of your options. While getting a credit card cash advance is not always ideal, it is still much better than a title loan because a credit card cash advance only has 24% APR. This means that even with the upfront fees charged by credit card companies on top of the interest, it is still a better deal than paying 300% APR and risking your car.
6. Get a Personal Loan With a Lower APR That You Can Pay in Installments
Getting a personal loan with a lower interest rate is another avenue that you could explore. The first stop would usually be banks and credit unions but if you have bad credit or unemployed, this could be difficult.
However, there are online lenders and peer to peer lending companies that may be willing to grant you a personal loan that you can pay in monthly installments. These plans are usually better than rolling over your loan month after month and paying 25% interest. Try to avoid payday loans because the interest rates are usually equal or much higher than title loans.
7. Sell Your Car and Get a Cheaper Model
Instead of defaulting on your title loan, try selling your car, paying off the title loan, then getting a cheaper model. Since your title and the copy of your keys are with the lender, it might be tricky to find a legit buyer but this is still a possibility. This option will work if you have a newer car model that you can still sell for a profit and the amount you could sell it for is much higher than what you owe the title loan lender.
8. Refinance Your Loan With Another Lender
Another option is to go for a car title loan refinancing. What this means is going to another car title loan company and transferring your car title loan. This is not a long-term solution because if you keep on missing payments with the new lender, you’re still at risk of losing your car.
So, how does this help you? This is a short-term solution that could buy you some time to find other means to get money. It is advisable, however, to find other sources of money to pay off the car title loan immediately rather than rolling it over.
9. Ask a Family or Friend to Refinance Your Loan
Can’t get a loan from a bank or a new lender? If all else fails and you’re at risk of losing your car, you could always try to ask a friend or a family member to be your financer. How is this different from just borrowing money? Instead of just borrowing money from them without any time limit or interest, propose an installment plan wherein you can pay the loan amount in monthly installments with interest. Even if you offer then 5-10% interest a month, that will still be better for you than paying 25% every month.
What Happens if You Don't Pay Your Title Loan?
One of the most popular questions from people who missed their title loan payments is: “What happens if you don't pay TitleMax back?” As mentioned earlier, TitleMax is a title loan lender that many people use. If you don’t pay your lender, you are therefore defaulting on your loan and this will often result in your car being repossessed. Aside from your car being taken from you, you might even be charged additional fees during the repossession process.
You might be wondering what the process of repossession is. With some lenders, they install a GPS system on your car and even make copies of the car keys. This way, they can easily find your car if you default on your payments. Many borrowers don’t really think about this when they are taking out the title loan because they feel that they can pay off the amount. However, after a series of missed payments, you could definitely lose your car.
The lender has to give you a notice that it is in the process of repossessing your car. If you receive this notice, it is important to act immediately and try out the different methods to get out of your title loan without losing your car.
Can You Go to Jail for Not Paying Off a Title Loan?
With title loans, the consequence of defaulting on your payments is the repossession of your car. You cannot go to jail for missing out on your payments. Before your car gets repossessed, you should receive a notice from your lender that they are in the process of taking your car away.
However, many debt collectors use threats to force borrowers to pay up their debts. One of these threats is telling you that you could go to jail for not being able to pay the title loan. This is false. You cannot go to jail for defaulting on payments on your title loan. The most that could happen is losing your car.
Were You Thinking of Getting a Title Loan? Here's Why You Should Avoid It in The First Place
You may already be familiar with the basic concept of a title loan, however, a lot of people take out title loans without really understanding that the sky high interest and fees can cause them to lose their cars. A title loan is a fast way to borrow money. You can usually get approval and get the money within the same day as long as you own a vehicle. The catch? You have to give the title of your car as a collateral in case you cannot pay the debt. The reason many people get a title loan is because it is very easy to get one. You don’t need to go through the hassle of getting a lot of paperwork to get approved. Even if you have bad credit, you can get approved for a loan as long as you have a car.
Unlike a personal loan that allows you to pay the debt in monthly installments with the interest built in, a title loan’s payment structure is very different. With most car title loans, you have to pay the entire amount after 30 days. If you are unable to pay the debt, you are usually allowed to “roll-over” the debt for another month. If after two months, you still do not have the money, the lender usually allows you to roll it over again until you fall into what is referred to as a title loan sequence.
The big problem with a title loan is the very high interest which usually reaches 300% APR or annual percentage rate. That means that if you get a title loan, your interest per month could be up to 25% of your loan amount and that may not even include additional fees. While the average amount of title loans in the U.S. is $959, the problem occurs when you add up the interests and fees. The total loan amount could then balloon into an amount you cannot manage to pay anymore.
For example, if you borrowed $700 from a title loan lender, you need to pay it in 30 days with a 25% interest so that’s already $875. If you can’t pay that amount, you get charged another 25% to pay it after another 30 days which raises your loan amount to $1,050. That means in 60 days, you’re already paying $350 in interest alone. That’s already half of what you originally owed! Take note that that’s only the interest. Some lenders charge additional fees that you may not have noticed or ignored at first when you took out the title loan.
Most people do not have the capability to pay off this full amount in a span of 30 days and that’s the reason why they get into a loan sequence that is very hard to get out of. When the loan amount with the interest becomes so high, they risk losing their vehicle.
Help in Getting Out of a Title Loan
While the idea of getting a title loan is an attractive way to get fast cash, it is better to explore other options because it will be highly likely that the interest and fees you’ll end up paying will be more than what you originally borrowed.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
