How to Get Out of a Car Title Loan

“Will I ever get out of a car title loan?” This is a question you might be asking yourself. Of course, you will, but it easier said than done. A Car title loan does provide a quick way of getting cash whenever you need it.  However, if you default, you risk losing your car, not to mention damaging your credit score.

Several studies show that 10 percent of vehicles involved in title loan end up being repossessed and the majority end up losing up losing their credit score. But you took the loan because you were optimistic that can be able to pay back on time and as required, this means that it’s actually easy to get out of the loan if you put in place some paying strategies. Let have a look on some of them:

Repay the Loan in full

This is probably the best option, but it you won’t have borrowed the loan in the first place if you have a way of paying it instantly. However, depending on your current situation, it’s definitely possible to pat the loan in full, including all interest fees and any possible additional charges. Most likely the terms of the loan indicate that you should be able to pay the loan within a stipulated time, let’s say 30 days. But the longer you take to pay the loan the more the lender benefits, so they will try to drag you out so that you continue paying higher interest rates.

If you have no funds to pay off the title loan, you can decide to sell your car, but often this is difficult unless you have a clean title, but it can definitely be done, and it does happen all the times. This option frees up funds to repay the loan instantly, and you can save yourself hundreds of dollars in interest rates or fees.

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Consolidate

The other ideal option is to consolidate your loan or replacing the car title loan with another one. Most likely, this won’t change the fact that you are short of cash, but it can definitely help you pay to your ability. You can consolidate it with a fixed rate loan from a bank which is often less expensive, or talk to your credit union. Though they can help you out, remember they will consider your credit score, and if it’s damaged there are chances that the interest rates will still be high. A check from your credit card can also reduce the overall cost if the consolidated loan, so long as you are confident that you can be able to pay on time, and you have a chance of getting your title back.

If your score is damaged, you might want to consider getting a replacement loan from small banks or online lenders where you have a chance of getting approved. A friend can also help you by co-signing, so long as they have a good credit score, but it’s important that you understand that they are taking a significant risk for you and ensure you are ready to hold your end of the bargain.

Negotiate

Contact the lender and explain that you have X amount of cash and you are willing to propose a settlement. They might be prepared to accept the settlement so long as it’s reasonable. This basically draws an attention to you. You can actually mention that you are trying to settle your debts to avoid filing for bankruptcy, so they might be willing to gain something before you become completely insolvent. Some lender won’t agree to your terms, but they will definitely give you better repayment terms or reduced interest rates, either way , you have an advantage.

Keep in mind thought, that if the lender does indeed agree to accept less that you owe them, your credit score will suffer, and borrowing from any other lender will be more difficult if not expensive.

Source: Hongkiat.com

File for bankruptcy 

If you can keep up to the loan and you are sure that you will never be able to pay the debt off, then you can file for bankruptcy. But there are chances that your car will be repossessed. Again, your credit score will be down for years, but if things get better, you will emerge reborn. There are two options when filing for bankruptcy, liquidation of assets and non-liquidation if you have a steady income. It’s important that you hire an attorney before you file for bankruptcy because there are details that might affect you in future, and unfortunately, these details far exceed the scope of this article.

These are the few recommended ways of getting out of the title car loan, but you can do a lot more as an individual, including loan default. Remember, as mentioned earlier, should you decide to do this, you will for certain damage your credit score, and the lender will repossess your car. This means you have no car, you have bad credit and you are in debt. On the brighter side, you have less stress and probably within that time you can put yourself on a better path.

Source: Thinkstock/dolgachov

Instead all these troubles, why not avoid the title loan in the first place? Get onto solid financial ground, build up an emergency fund and improve your credit score. You won’t have to borrow an expensive loan, and when you need one, you will get it with reasonable interest rates. There are also other better alternatives to car title loans, but remember to evaluate the interest rates and penalties and compare with other loan options that may be available to you.

Emergency loans from your employer may have no interest at all or probably have low-interest rates, and the repayment terms are reasonable. You also have an option of payday loans; they might charge high-interest rates, but you won’t lose your cart should you fail to pay on time. If you decide to get a car title loan, rather than being just optimistic, be certain that you will be able to pay on time.