The Ideal Solution
The simplest way is to repay the loan. However, this is a tricky scenario because you wouldn’t have requested a loan if you had the extra money in the first place. So, if you have the money to refund, call your lender and ask for the best payment structure to follow.
Filing for Bankruptcy
In some circumstances, filing for bankruptcy may be a relief to most title loans. It can assist you in avoiding liability to a deficiency judgment, which is a rule that states you should pay the difference between the amount you still owe and your car’s value.
However, remember that the vehicle will continue to serve as collateral, meaning the lender can repossess it should you fail to pay. Financial experts advise people to discuss their situation with local lawyers before filing for bankruptcy.
Avoiding Title Loans
Another excellent solution is to avoid title loans altogether. Once you start avoiding title loans, you will be well prepared to handle your financial woes. Preferably, you can create an emergency savings fund or even improve your credit score to get countless access to loan options should the need arise.
Default
Although defaulting is allowed, you need to consider the consequences before opting to default. For instance, going this route negatively affects your credit score, and the bank repossesses your vehicle. Of course, you may decide to surrender your car willingly, but remember, you may still witness a bad credit score rating.
Sell the Car
Swapping out the vehicle makes sense if you lack sufficient cash to repay the loan. Nonetheless, it might be a daunting process as you don’t have clear proof that you own the vehicle, but it’s still achievable.
Consolidate or Refinance
The other notable option is to replace the title loan with another one. While this option doesn’t solve the central problem, it can stop you from getting into extreme financial challenges.
Should your title loan lender exit the business, your debt may or may not be relieved. Remember that some debt collector agencies buy debt from the lenders who are going out of the business. So, your debt may be purchased by some of these companies, meaning you still owe someone the loan if that happens.
Title Loans Pros And Cons (mostly cons)
It’s essential to review a title loan’s pros and cons before taking one out because it can help you discover whether it is the best option for you.
No Credit Check
Most of these title loan lenders don’t check your credit score. This aspect is exceptional if you want a loan, but you have bad credit that doesn’t meet traditional loan requirements or have exhausted all available credit unions.
Fast Approval and Access to Funds
Lenders will only take a couple of minutes to review the application, assess your vehicle, and ultimately approve the loan. You can access the funds almost instantly or after a few days following loan approval.
Inflated Interests and payday loans Georgia Fees
Title loans’ annual percentage rate can be as high as 300% due to finance charges, interest rates, and other hidden fees. These excessive charges can further hurt your financial obligations.
Potential Debt Trap
According to CFPB, over 50% of auto title loans become problems to debtors. Simply put, debtors will continue to request new loans to reimburse the previous ones. These loans are dangerous and harmful as they can get you into debt cycles that you can’t evade easily.
Losing an Asset is Easy
Title loans can put you in dreadful situations. For example, you can lose your vehicle if you fail to repay the loan. Thus, you need to pay the loan on time to avoid the prospective burdens included in these loans.