Collection on Title Loan

If I default on a title loan can the lender repossess my vehicle?

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Bill's Answer: Answered by Mark Cappel

A "title loan" offers the consumer cash from the lender in exchange for the title of a paid-for vehicle to secure the loan. (The titled property can be a passenger vehicle, motorcycle, boat, or airplane.) Typically, these loans are due back in full 30 days later. There's no credit check and only minimal income verification. The fees range from $80 to $100 for a loan amount of $500. The annual percentage rate (APR) on these loans can be as high as 250%. By federal law, title loan lenders must disclose the interest rates in APR terms, but it is common for title lenders to hide the APR in favor of a monthly rate, which appears less usurious. Many states regulate title loans.

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It is common for title lenders to accept interest-only payments for an extended period of time, which causes the consumer to in a very short period of time pay more in interest than the amount borrowed. The lender has the right to repossess the titled property if the consumer defaults on the loan.

Because of the very high interest rates and stiff fees and high risk for losing a vehicle they have paid for, consumers should avoid title loans.

Importance of State Laws

Regarding your question, "Do they have to repo the car first and then hold me responsible for any remaining balance if any?" The answer to this question depends on the laws in your state of residence.

Here is the worst-case scenario: For the sake of argument, let us say that the vehicle has a fair market value of $1,000 and that you got a title loan of $400. Let us also assume that you repaid the creditor $0. The creditor has the right to repossess the vehicle, sell it, and if there is any balance left over after paying the interest, balance, and auction fees, you will receive that surplus.

Now let us change the facts and say that for the sake of argument that the vehicle has a fair market value of $1,000 and you got a title loan of $3,000. Let us assume again that you repaid the creditor $0. The creditor repossesses the vehicle and sells it for $1,000 and tacks on $500 in fees and interest. You would be liable for the deficiency balance of $2,500.

Regarding your question, "Do they have to get the judgment before they can repo the vehicle?" the answer is "maybe" and is dependent on your state of residence. In some states the creditor being on the title gives them the right to repossess the vehicle. The vehicle is, after all, in the creditor’s name. In other states lenders will not take possession of a vehicle but instead file a lawsuit to collect the balance due plus court costs and finance charges. You did not mention your state of residence, so it is impossible for me to say what your rights are in your state.

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Comments (90)

Haley H.
Appleton, WI  |  April 12, 2014
I took out a title loan for a rough estimate of $1,250. I paid my monthly payment on time every month. I had some financial issues happen back in February and as a single mother my main concern was paying my rent and utilities to make sure my child was warm and not homeless. I forgot about my payments and missed February and March for a total of $510. I received a letter April 3rd stating if I did not pay them the full $510 by the 7th I would have defaulted my loan and I would have to pay back the full initial amount and my file would be sent to proceedings in court and I will be responsible for all fees.

My question is, do I only owe them the amount they lent me or do I owe them the whole amount with the interest rate and all that (I believe over the term it added up to $3,000 something)? Also since they tried serving me papers does that mean my car is now out for repossession? If I just let them take the vehicle do I have to pay them any money since my loan amount is less then my car is worth? Like I said, I'm a single mother and barely making it now. I don't have $1,300 to give them but I could come up with maybe $600 if I had to.

I'm scared to call them and see what I can do because I've heard such nasty things about the customer service and the way people are treated by them if you default your loan.

I live in Wisconsin.
April 17, 2014
You have three tools at hand: Your money, your words, and the law. You must use all three tools to work your way out of this jam.

Consult with a lawyer who has consumer law experience immediately to learn if the title loan is legal in Wisconsin. If you cannot afford a lawyer, contact Legal Action of Wisconsin or another Wisconsin pro bono program to find no-cost legal services.

Read the article Wisconsin Collection Laws to better understand the state laws that protect you, and the Wisconsin Bar Association's Wisconsin's New Automobile Repossession Law: Creditors in the Driver's Seat to learn more about Wisconsin's repossession laws.

Read the article Debt Settlement Advice to learn how to negotiate an effective settlement to prevent a repossession. The information you learn from your lawyer will help guide you to a solution to the debt.

You asked what would happen if the sale price of your automobile does not cover the balance due on the loan. The shortfall is called a deficiency balance, and the lender has the right to collect this amount from you.
Mania P.
Jonesboro, GA  |  April 01, 2014
I live in Georgia. I own my car and I'm having a hard time selling it. The value of my car is about $4,000. I would like the money to go towards another car. My sister told me she took out a title loan for a vehicle she no longer wanted and surrendered the vehicle to the tittle place here in GA. She said nothing was put on her credit and she didn't have to pay anything back, she took the money and they got the car. She did this twice. My question is do you think this is a good idea for me to do. Im thinking about taking out a $5,000 tittle loan and surrendering my car. Will this affect my credit? Will I end up owing anything. Will I just be screwing myself over?
April 01, 2014
I dislike this idea, and urge you to think about its potential pitfalls.

When a car is repossessed, the lender typically sells the car at an auction. Auction prices are less than the retail, Craigslist prices we buy and sell for. When the auction price is less than the loan amount due, the difference is called the deficiency balance. The borrower has liability for the deficiency balance, plus the cost of the auction, plus other fees the lender is permitted to add.

Let's say for the sake of argument a title lender makes a $4,000 loan on your car. You default. The lender repos the car, sells it for $2,000, and adds $500 in fees for the repo and auction. The lender has the legal right to collect $2,500 from you. Your scheme nets you $1,500.

Now let's change the facts a bit. Let's say you sell your car on Craigslist for $3,000. You get to keep all $3,000. You don't get all $4,000 the car might be worth, but keeping all of your sale proceeds is better than giving up more than half of it later.
John P.
Fort Worth, TX  |  March 26, 2014
I took a loan on my vehicle in Dallas TX, I paid it off and I got my title back. Then they called me to say they accidentally cancelled my last payment of the interest. And so now I was wondering if I do not pay that payment what will happen? Because I already have my title.
March 26, 2014
What does your bank or credit union say about this payment? Was your check or payment cancelled or otherwise reversed? If the payment went through as you expected as all of your payments did, then your last payment was your last payment. Keep complete records, as your confused title lender might try to collect the last payment from you in the future, and you want solid proof you paid the loan as agreed in your contract.

If the payment was reversed, rejected, or cancelled, then you have a legal obligation to make the last payment, even though the title lender mistakenly gave you a clear title.
Rick A.
T/o Berwick, PA  |  March 25, 2014
Hi. I have a question. I live in PA. Last march I took a title loan of $2000 on my car, in VA. It had a PA title. PA didn't put the company's name on the title, because they didn't have a PA license to do business, because their rates are over the PA required limit. I had paid $1300 on it, which was mostly fees. After my wife was hospitalized, I missed work and was late. They were so rude I sought advice from a attorney. He contacted them and they ceased collection. He suggested I pay $648 plus $124 interest before the loan matures. It matures in two days and I'm gathering that up to send to them, as I have missed a lot of work time due to injury. Can they come to PA and repossess my car? They haven't yet, but I was wondering if they can. There is no lien on my title according to PA. No deadbeat comments. I did intend to pay this back but as a result of my wife's illness and my injury it's hard enough to make ends meet. I didn't foresee this when I took the loan.
March 25, 2014
Your Pennsylvania lawyer is your best source of information on your state laws and how they apply to your situation.

I see the lack of it having its name as a lienholder on your title as a significant obstacle to the lender repossessing the vehicle. It would need to file a lawsuit against you, win a judgment, and then convince a Pennsylvania court to ignore your state's lending laws to issue an order allowing the repossession. There are a lot of "ifs" built into my previous sentence, not all of which may be possible to overcome.
Karen D.
Chesapeake, VA  |  March 24, 2014
My daughter got a title loan on our truck in Virginia. Because I'm on the title as well I had to sign as cosigner. She's been late on payments and tonight the truck was repossessed. However, I was never notified, either by phone or mail, of the situation. I knew she had talked to them in February, and I now know there was no payment made in Feb. or March. What are our rights? I was under the impression there should have been written notice, potentially certified mail, of the coming actions, but we never received anything in the mail. I'm home all day and she still lives at home. What do I do? The tow truck driver said the company, TitleMax, should have proof that they sent notice. Please help.
March 27, 2014
You need more help than someone can offer in a few sentences on a Web page or in an e-mail. Consult with a lawyer in your state of residence to learn your options for reversing the repossession, and if it was conducted in a manner consistent with your state's laws.
Brenda H.
Marietta, OK  |  March 24, 2014
My daughter got a car title loan on a car I gave her. The car is still in my name so they charged her $300 extra on the loan to transfer the title into her name back in Sept 2013. We just found out they did not transfer the title into her name, it's still in my name with the lien on it. Now she will have to pay late fees & everything to get it into her name. Is this legal of them? What can we do? So yes the title with my name on it has a lien on it for a loan in my daughters name. We live in Oklahoma & the loan is in Texas
March 24, 2014
I am confused by the extra fee you mentioned. In states I'm familiar with, it should cost a small amount to transfer a vehicle's title from one family member to another. Here, you should have been a party to the transfer because the vehicle was in your name. Several things don't add up here.

Ask your daughter to consult with a lawyer in her state who has consumer law experience. Ask her to bring all of the documents relating to the title loan and the bogus title transfer to her meeting with the lawyer.
Cherie R.
Milwaukee, WI  |  March 22, 2014
I have a title loan in Wisconsin and I'm in the process of moving to Iowa is there anyway that I can transfer my title loan down to iowa
March 23, 2014
Your current title-loan lender will not release the lien on your car until it is paid. Unless you had so much value in the car that you could get another loan from a new lender in Iowa, using the proceeds to pay off your current loan, I don't think it is likely you can obtain another loan.

Check the language of your title loan agreement to see if there are any restrictions regarding moving. If there aren't, then take the paperwork with you regarding the title loan, so you can properly list the lien-holder when you register the car in Iowa.
Ann T.
Atlanta, GA  |  February 10, 2014
Hello! I made a title loan on my vehicle a few months ago. I went in a couple of days ago to pay my title loan in full to receive my title back. When I get there the representative gave me an amount that was needed to pay my loan in full. Upon receiving the amount, I tried to correct the representative and tell him that the amount should be MORE! I had a rough estimate in mind that I would have to pay and the amount he was giving me was about $800 less than I expected to pay. He disputed me down that he knew what he was talking about and actually showed me the amount he was telling me on the computer screen. I tried to correct him a total of three times! Finally I gave him the amount he was asking me for and he gave me my title and the extra key. I went to get the lien off of my title the next day. A couple days later I received a voice mail from the title loan store stating that they had made a mistake and I needed to bring them the rest of the money by 6pm or legal actions would be taken. Problem is that I no longer had all of the money because just being honest had spent some! My question is, now that I have a clear title in my name due to their mistake what kind of legal actions can they take against me? I repeat...... I tried to be honest three separate times with this guy but he insisted for me to pay the amount he had given me. What can I do at this point being as though I truly just don't have all the money any longer? I live in Georgia.
February 11, 2014
Negotiate a date and amount for making your final payments. Explain this situation is as much their making as yours, and their insistence on an immediate payment is not reasonable under the circumstances.
BinMO H.
Independence, MO  |  February 10, 2014
I have a title loan in MO. I refinanced it in November and have made payments on it but my last payment was due on the 27th of January. He gave me an extension til the 11th (tomorrow). I cannot pay it until the 14th and plan to pay in full. He said he cannot promise what will happen after tomorrow and cannot extend a few more days. Do they have to send me a right to cure letter? I only received it once a few years ago when it was on the original loan. He has always allowed extensions until the refinanced one and with that, it is a new loan, as I got all the paperwork and paid in full stamp on them. So, this is the first default for the refinanced one. Does that start over the "exceptions"? Will I get the right to cure notice?
February 11, 2014
What you're asking boils down to, does a borrower get a new right-to-cure letter for each loan, or does the right-to-cure work once between the parties? I confess I do not know for certain. Consult with a Missouri lawyer who has consumer law experience. If you cannot afford a lawyer, contact a Missouri pro bono program to find no-cost legal advice.
Rob L.
Muskego, WI  |  February 07, 2014
What type of time limit is there on a title loan in Wisconsin before a repo? My payment was due last Friday. I was unable to make the full payment, and made a partial payment. Thinking I would have my tax return today, I said I could pay the remainder today. The tax return did not show up. I cannot make a payment until I either get that or I get paid next week. Can they repossess my car between now (Friday) and then?
February 07, 2014
Short answer: In Wisconsin, the lender must give the borrower notice of a repossession, which it can do thereafter immediately. After receiving the repo notice, the borrower has the right to demand a court hearing.

For a more complete answer, read the excellent Wisconsin Bar article Wisconsin's New Automobile Repossession Law: Creditors in the Driver's Seat and specifically the section "The New Law: Implications for Creditors and Consumers."
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