When you have your finances on the low, auto title loans are usually the primary recourse of many. Why is that so? Well, this is primarily because auto title loans are regarded as short-term secured loans which approval would only take a couple of minutes. Yes, you get it right!
These loans have higher approval rates because all you have to do is put your car as collateral and in case you fail to pay, you’ll need to surrender your vehicle to your lender. These are the typical situations when you’re dealing with auto title loans applications. However, what is risky here is when you default on your auto title loan. So, what really happens when you fail to pay your credit? Let’s check these out:
Repossession of Your Car
Applying for a title loan may appear very easy and beneficial for emergency cases. However, you may be wrong all along. In dealing with auto title loans, high-interest rates are also coming your way.
- Due to its simplified application process, lenders would approve your loan if you have a valid title in your hands. It is tempting, right? You get an instant cash as soon as you give your asset as security.
- However, title loans do not always work like this. For some reasons, the interest rates on top of your principal loan make you gamble everything. Meaning, times may come that your monthly income could no longer compensate your debts
So, if you are too drained that you could not be able to pay your monthly payments for your auto title loan, chances are you’ll voluntarily hand over your car to your lender. When this happens, you just have to let go of your asset in exchange for your failure to remit monthly repayments.
- Yes, it is a financial disaster that you would not suppose to encounter if you just take necessary precautions from the beginning. If the repossession of your vehicle comes, you just have to give in freely as you are bound to the terms and conditions outlined in your loan agreement.
- What is required from you when you are already in default of your title loan is the compulsory surrender of your asset. From there, you don’t need to make payments anymore as your loan balances will now be closed.
Other Legal Actions
If you owe a lending company with title loans and you fail to make scheduled payments, then, you still have nothing serious to worry about. Once you yield your car to your lender as part of the agreement, everything will follow smoothly except the unfortunate fact that you would permanently lose one of your assets. Such loss may be so heartbreaking, right? You have nothing to do but accept it.
Due to default, you would not only be able to save your car, but you would as well get bad credits. In these distressing times, here are two of the most asked questions regarding a default on title loans:
Can You Be Imprisoned When You Default On An Auto Title Loan?
You may be asking about whether you’ll go to jail because of the non-payment of your title loans. Well, the answer is of course no.
- For some, putting you in jail may be the worst case scenario that a lender may do especially when you show non-performance of the terms and conditions of your loan contract. It may be happening in other places but, as laid down by law, no lender can threaten you about it. Perhaps, are you even afraid of getting arrested for default? Then, you should not.
- An arrest cannot be considered as a legal remedy for lending companies to enforce compliance with the auto title loan contracts. You could not also be subjected to harassment when facing this kind of financial dilemma. For instance, threatening you of going to prison is a violation of your rights under Fair Debt Collection Practices Act. So, know your legal rights, and you’ll surely be protected.
Will Your Cars Be Taken By Force Or Physical Threats?
Well, the answer for this is no. Cars which are also taken by force, intimidation, coercion and other violent means are also prohibited. What the lender can legally do is to take away your car within a reasonable period of time. From there, notices are also given to remind you of your financial liabilities including the timeline of the repossession of your car.
Are Repossession Of Your Asset and Other Legal Measures Worth The Risk?
Losing your car is so devastating. But, given the consequence of having your asset forfeited, the critical question is if it is still worth all your effort and time. In this case, it is not at all. You can use these auto title loans to your advantage when you are sure and confident that you can repay back your credit.
- However, if you only earn a sufficient amount of income, then, you’ll find these loans disadvantageous at all. Not only that, your credit profile would likely suffer if you’ll go on with these without knowing the potential risks that title loans may cause your financial life.
What Are The Things To Do To Prevent Auto Title Loan Default?
When your auto title loans start to stress you up, give yourself some space to breathe and relax for a while. If you already have a title loan on your shoulder, you just need to be mindful of the steps you’ll be taking to avoid auto title loan default.
- First, plan your monthly finances well and make sure to allocate payment of your title loan every month. Every postponement you make affects your credit line.
- Second, do not miss any scheduled payments even only once so that you’ll not incur a hard time recuperating from the loss.
- Third, look for other helpful options to pay off title loans as fast as you can. It may be through debt consolidation or refinancing. Besides, what should be presented here is the accumulation of penalties on top of your interests when you delay your payments. Having these things done may guarantee your car’s safety from being repossessed by the lender.
So, if you are planning to take advantage of auto title loan as a financial way out, you better rethink your plan. Being so fascinated with how title loan applications work conveniently for you does not mean that you have to do so even though you lack financial resources. What you can do is exhaust all other means first and resort to it only when there’s no other way.