Tips for Paying Back an Auto Title Loan
When there are so many opportunities surrounding you acquire money for a variety of emergencies or unforeseen situations, it’s understandable that you may take out a few loans that you come to later regret. A car title loan essentially allows you to give up your title to use as collateral on a loan. It’s often a last resort that people use when they’re unable to secure credit through more normal patterns. We’ll give you a few helpful hints about how they work in the real world and what you can do to pay them off — quickly.
The Gritty Reality
Not all states allow these loans to happen, but title loans are quite popular in the ones that have permitted them. But for about 10% of the people who borrow the money, the end result is a repossessed car or truck. The interest rates may be higher than people realize, and they seem designed to catch people in an endless loop of payments. Some quick-cash places have been known to go up to 153% in annual interest, an exorbitant rate that would make even the most financially stable person feel scandalized. States like California do not set interest rate limits nor do they regulate these loans in any way. After failing to keep up with payments, people see what may be their only source of transportation being dragged away from them forever. However, the truth is that despite these tales, these types of loans continue to be popular with the public. Millions of people in America have experienced these dreadful circumstances without much recourse to stop it.
Taking Action
The first thing you’ll want to do if you’re hoping to pay off your title loan is to make a call to the people who gave you the loan and start asking questions. Thousands of people land themselves in a hot mess because they simply don’t take the time to understand the consequences of what these car title loans will really mean for them in the future. If this has happened to you, it’s understandable that the immediacy of your situation would have taken precedence over the ramifications, but hopefully you’re in a less desperate situation now. One major lesson to remember is that the squeaky wheel gets the grease. Not only do you want to find out about interest rates and how the original principal is paid off, but you’ll also want to find out what type of payment schedule you can work out with them. You may be surprised at what they may agree to, since in the end, they want your money — not your car. Having to repossess your car means extra work and an expense that they would rather not have to deal with, plus they’ll have to find a reasonable buyer too or risk selling your car for pennies on the dollar.
Understanding the Numbers
One study found that if the average loan for a car title was $1,000, they wound up paying $2,200 total to get out from under the debt. The loan companies advertise that this exact strategy can save your financial woes in just minutes, but it really puts a burden on your back for months and potentially years. Other companies have made false promises about their rates and fees in order to entice people into signing up with them. If you are in this situation where a company falsely advertised their terms, you may be able to use legal recourse as a means of getting a better outcome on your loan (or to get it dismissed entirely.)
Focus on Paying It Back
Unfortunately, if you were given all the information upfront, then you’ll likely just have to concentrate your efforts on paying this one back. In the case of one auto title loan, it was found that $650 was used to pay down the principal if the debtor handed over $1,000. For families who don’t make enough money to cover this, it becomes a horrible cycle where it seems there is no exit sign for the merry-go-round of debt. However, there is help if you know where to look. You may want to consider getting a consolidation loan through a credit union or bank which may be able to replace the car title loan. Hopefully you’ve already trimmed as many expenses from your budget as humanly possible, but you may want to see if you can squeeze another few dollars out of your income by cutting just a few more things. You may have to sacrifice anything unnecessary until it’s paid off. If worse comes to absolute worst, it may mean skimping on bills (e.g., paying the minimum amounts) with lower interest rates to get this one out of your hair. The less time they have to collect on their ridiculous interest rates, the better.
Last Chance
You may have an option to sell your car for something cheaper to get out from this nightmare. If your car is valued at $5,000 and your auto loan is for $1,000, you can sell your car for $5,000, buy another car for $2,500 and then use the remaining cash to pay off your title loan. You’ll need to work with the lender to arrange title transfer of course, but this could very well be the out you’re looking for to get your financial control (and your life) back.*
*This article provides broad and general guidelines and does not constitute professional or legal advice. You should not use this article as a substitute for your own judgment, and you should consult professional advisers before making any advertising, tax, legal, financial planning or investment decisions.
