Vehicle title loans are cash loans in which the title loan company places a lien on your vehicle until it is paid off. The loan is typically due in approximately 30 days and comes with an extremely high interest rate. If you cannot pay the loan in full, you have the option to make a state mandated minimum payment and renew the loan for another month. Title loan problems usually arise from the inability to make the loan payment.
How They Work
Though each state sets its own laws regarding allowable interest rates and remedies for title loans within its jurisdiction, typical title loans are due every 28-30 days. Many consumers cannot pay it in full that quickly, therefore, pay a renewal amount. The initial renewal payments on such a loan include mostly interest with a tiny amount going toward the principal. For example, on a $1,400 title loan the payments might start at $250 with $8 going to pay the principal down and $242 going to interest. The next month the payment may be $242 with $10 going toward the principal and $232 going toward interest. The payments continue to decrease gradually, while the principal payment increases slightly. Because of the way title loan payments are structured it the customer can end up paying double the original loan back when all is said and done.
Trouble Arises
Most title loan contracts include a clause that if the customer is one day late on paying the renewal amount, the entire loan can be called due immediately. This means that the customer must pay the whole loan off including the first-time interest payment. Few customers who turn to title loan companies are in a financial position to do so, which puts their loan in default. A defaulted loan status sets the stage for the customer to receive several phone calls a day, to have friends, relatives and employers contacted in the effort to find the customer and finally the vehicle can be repossessed. Repossessions are mandated by law to provide methods for the vehicle to be returned, but usually the entire loan, plus the repossession fee, plus impound/storage fees must be paid within a matter of days. If not paid in the allotted time, the vehicle is sold to pay the loan balance.
Negotiate With the Company
The most important solution to title loan problems is communication. Contact your title loan company as soon as you realize you cannot make the payment on time. Most title loan companies want to avoid the cost and hassle of tracking down your vehicle, seizing it and putting it up for sale. They would much rather work with you if possible. The majority of title loan companies will not take a partial payment, as it becomes a sticky legal problem with regard to calling it due for nonpayment once a partial payment has been accepted. Being honest with the company about when you will be able to make the payment is the best way to handle the problem. Many companies have rules about how many broken promises they can accept before they must default your loan, therefore, do not make promises you cannot keep. Tell the company honestly what date you can make the payment and that you will also make the next payment on time rather than begin a cycle of late payments.
Borrow From Friends/Family
If the company refuses to work with you on a late payment, you might be able to borrow the funds from friends, relatives or take it off a credit card cash withdrawal. Be sure to set up a repayment agreement for the funds that will not interfere with the ability to make the next title loan payment.
Pay the Loan Off
If you do not make the payment and the title loan company sends it for repossession, you will be racing against the clock. Repossession companies are aggressive and relentless in their search for the vehicle. Check with state laws regarding repossessions. Most states do not require you to bring the vehicle to the repo man, but do provide criminal charge statutes for anyone who purposely hides a vehicle from a repo company. The loan is considered secured, therefore, hiding the car constitutes hindering a secured credit agreement, which can be a felony. If your title loan goes into default you must pay the loan in full before the repossession company finds your car, or turn the car in voluntarily and attempt to come up with the finds to get it out within the allotted time frame, typically three to 20 days from the date you turn it in. The same time frame is allotted when the car is repossessed.
Repo vs. Voluntary Turn-In
The decision to do a voluntary turn-in or let it get repossessed is an individual choice. Waiting for the repo man to locate the car can stall for time giving you more time to save toward the total "get out" fees. The down side is that the cost will be more because repossession fees will be added to the total cost of getting the car back. In addition, the repossession agent may find your vehicle in a store parking lot, your work parking lot, a doctor's office, your child's school or elsewhere. Having it towed away without warning can put you in a bad position as well as cause embarrassment to you at your place of work or your child's school.
A voluntary turn-in may start the clock ticking sooner than waiting for the repo man to find your car, however, many title loan companies are willing to drop the repossession fees from the total amount if you turn the car in voluntarily. In addition, you can avoid the embarrassment of having the vehicle hooked up and towed away in front of your co-workers, friends or family members.
Refinance
If you have paid off a substantial portion of the loan when you run into financial difficulty meeting the next payment, the title loan company may be willing to have you refinance the loan. This process puts you deeper into debt as it typically sets up a second title loan with additional payments and interest, but if your financial crisis is temporary, it can be a solution to letting the loan default. If you have not paid enough of the loan down, or the company has rules against such practices, this solution will not be available.
0 comments:
Post a Comment