Collection on Title Loan

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

I put my car title as collateral on a loan. I have been experiencing financial difficulties and have not made a payment in 45 days and they have issued a warrant in debt for me. They have made no attempts to repo the car but they still have the title. Do they have to repo the car first and then hold me responsible for any remaining balance if any? If not why won't they give the title? Do they have to get the judgment before they can repo the vehicle even though they already have the title?

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Bill's Answer
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Highlights


  • Avoid a title loan if possible.
  • Title loans come with a high APR.
  • Repossession is probable if you fail to pay a title loan.

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.

Quick tip #1:  

If you are struggling with debt, get a no-cost, no obligation analysis of your debt options from a pre-screened debt relief provider.

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.

I hope this information helps you Find. Learn. Save.

Best,

Bill

Bills.com

50 Comments

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  • 35x35
    May, 2013
    james
    Can a title loan company file chapter 32 felony against me in the state of Texas after I defaulted on $550 loan after 6 payments
    0 Votes

    • 35x35
      May, 2013
      Bill
      Allow me to make three points before answering your question:
      • District attorneys, attorneys general, and special prosecutors may charge a person with a crime. Lenders, such as credit card issuers, banks, credit unions, title and payday lenders, do not have the ability to charge people with crimes. A lender who thinks a customer committed a crime is allowed to share that information with a prosecutor. However, just because a lender says something like, "We'll ask the DA to charge you with a crime," does not mean the DA will do so. This leads me to my second point.
      • Fraud is a crime of intent. A prosecutor needs to prove beyond reasonable doubt to a jury that the defendant "...intentionally or knowingly (made) a materially false or misleading written statement to obtain property or credit..." Texas Chapter 7 § 32.32.
      • Let us assume for the sake of argument a local DA could prove you intended to commit fraud. Under § 32.32, the threshold for a felony conviction is $1,500. I would argue a $550 title loan would be considered a Class A Misdemeanor, and not a felony under § 32.32.

      Getting back to my second point, it seems to me your making six payments is strong evidence you intended to repay the title loan. A prosecutor would need compelling evidence to the contrary that overcomes your payment history. A prosecutor would need an admission from you to the effect of, "I planned all along to rip-off that title lender," to show you intended to commit a crime.

      My advice? First, read § 32.33 to understand Texas' law regarding hindering a secured creditor. If the title lender seeks to repossess the vehicle and you conceal it, you may be guilty of felony. Second, consult with a Texas lawyer who has consumer law experience to learn more about your rights and liabilities.

      0 Votes

  • 35x35
    Apr, 2013
    kathy
    I currently have a title loan in Illinois. I recently found out that according to Illinois law, "Lenders may not take keys or copies of keys as security. 38 Ill Adm Code 110.390(a)". My question is this, if this is the case, why then did the title loan company make a copy of the key?
    0 Votes

    • 35x35
      Apr, 2013
      Bill
      Perhaps because it is not aware of Illinois 38 Ill Adm Code 110.390(a), or because it does not care it violated the law by doing so.

      I think perhaps you were really asking, "What can I do if a lender violates 38 Ill Adm Code 110.390(a)?" Consult with an Illinois lawyer who has consumer law experience to learn what, if any, recourse you have against the lender. If you cannot afford a lawyer, visit the Illinois Legal Aid Online Web site to find a lawyer in your area who provides legal services to people with low or no income.
      0 Votes

  • 35x35
    Mar, 2013
    Joe
    We went to Loan Depot in Granbury, Texas and took a $400 title loan on a minivan worth $1,500 but couldn't pay. It was repossessed and they stored it for the last 2 years. They didn't try to auction or sell it. Now, they want us to pay $1,300 in storage and fees. Since it was their fault for not trying sell it, I don't see how they can say we owe them more money when they repo'ed it and have the title! Can you tell me if this is legal or possible?
    0 Votes

    • 35x35
      Mar, 2013
      Bill
      What you described is not permitted under Texas Business And Commerce Code, Title 1. Uniform Commercial Code, Chapter 9, Sec. 9.615. Under the UCC, the secured party (here, it's Loan Depot) must act in a "commercially reasonable manner" to sell or auction the vehicle, and give you any surplus from its sale. If, as you mentioned, the vehicle was worth $1,500 when the vehicle was repo'ed, you owed Loan Depot $400, and for the sake of argument it sold the vehicle right away for $1,000, Loan Depot would owe you $600 minus any repo fees.

      Consult with a Texas lawyer who has experience with consumer law to learn how to answer Loan Depot's unreasonable claim against you.
      0 Votes

  • 35x35
    Feb, 2013
    Aaron
    What are the repo law(s) in the state of Kansas/Missouri? $2,000 loan out. The vehicle is in Kansas but got the loan from Missouri.
    0 Votes

    • 35x35
      Feb, 2013
      Bill
      Let us start with two brief reading assignments for you:
      1. Read Missouri Collection Laws to get a basic understanding of Missouri's consumer protection laws.
      2. Read Kansas Collection Laws to get a basic understanding of Kansas' consumer protection laws.
      In Kansas, a lender must give notice before it can repossess a vehicle. The lender can repossess the vehicle on its own, and does not need the court's permission or involve the local sheriff. If the collateral is worth less than $1,000, the lender may not collect a deficiency balance. See Kansas Statute Chapter 16a Article 5 to read Kansas' laws.

      Missouri's laws are similar, though there is no restriction on collecting any deficiency balance. See Missouri Section 400.9-101 to read the statute.

      Implied in your question is which state's laws apply. Dig out your loan contract and see if it contains a choice of laws clause. If it does not, consult with a lawyer in your state of residence to learn which state's laws apply. If you are a Missouri resident, the answer to your question is easy. If you are a Kansas resident, then which laws apply is a bit more complicated.
      0 Votes

  • 35x35
    Aug, 2012
    Tammy
    My fiance took out a title loan here in GA. He hasn't been able to make good on it. We tried to work out an different payment planned but were denied. Now an "agent" is threatening to put a warrant on him in our county. Can they do this? I thought it was a civil matter.
    0 Votes

    • 35x35
      Aug, 2012
      Bill
      I cannot find any Georgia law criminalizing the failure to repay a title loan. See Georgia O.C.G.A. § 44-12-131 to learn more about Georgia's title loan laws.

      In all states, arrest warrants are created by judges and magistrates, and not creditors. The collection agent violated the Fair Debt Collection Practices Act when he or she threatened your friend with arrest.
      0 Votes

  • 35x35
    May, 2012
    Ashley
    I'm from SC and I have a title loan on my car. I missed one payment, and I got a "Notice to Cure" in the mail. My last day to pay was 05/22. I took a payment up there and was told that I had to make another payment the next day. The "Notice to Cure" didn't say anything about making two payments. It just informed me if the past due about is paid by 05/22 then I could continue with my loan agreement as thought I was never late. Can they still take my car?
    0 Votes

    • 35x35
      May, 2012
      Bill
      Review the title loan contract you signed. I am guessing, note that word choice, there may be an acceleration clause of some kind in your contract that requires you to make a second payment immediately when you become delinquent. However, I hasten to add I have not seen a title loan contract before, and I do not know what sorts of clauses these contain customarily. If you cannot find an acceleration clause in your title loan contract, take it to a lawyer in your area who has contract law experience. He or she will read your contract, and explain your rights and liabilities. He or she will also advise you if the contract's clauses are permitted under your state's laws.
      0 Votes

  • 35x35
    Apr, 2012
    Vicki
    I am hopefully going to be an office manager in a bail bonds company, this is new for me, however the owner knows that I am an honest person and he has had bad luck with other employees (he is jxtarted his own company 3 years now) my question is when repossessing the vehicle do I need the original certificate of ownership showing the company as the lien holder or can we use the electronic copy we printed out from the DMV showing the company as the lien holder. Thank yo
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      After you are hired, ask the owner of your company to spend an hour with you in a lawyer's office to review the laws — both statutes written by your state legislature and case law — that impact your business. Details and nuance matter. For example, in Nevada, a creditor may repossess a vehicle if the vehicle's owner does not object. However, if the owner objects, then the creditor must get a court order before a repo man can touch the vehicle. California, on the other hand, does not have that rule. My point is, you need to know all of the details of your state's laws backwards and forwards because if you do not, you will eventually learn the rules in a very expensive manner.
      0 Votes

  • 35x35
    Mar, 2012
    tony
    I live in Alabama and I took out an $800 title loan abt 4 months ago. I have been paying on it until something came up and, didn't pay last months fee. I called twice to make arrangements and they fell through but yesterday, they came and took my car. I need to know what it is I need to do to get my car back? It is my only means of transportation. What kind of fees am I looking at paying and who I need to pay? Any help would be great. Thanks.
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      You need to reach the party that repossessed your car and find out what they are asking. The paperwork you received when you took out the title loan may specify how much fees and penalties can apply if you default on the loan. It may be the case that the lender has the right to sell your vehicle and keep whatever it sells for.
      0 Votes

  • 35x35
    Jan, 2012
    Jack
    I took out a title loan for $700 on my vehicle back in October, 2011. I was unable to make the required payments as I only receive social security on behalf of my 4 children and $380 for myself and my interest payments were $230 per month. I was not thinking rationally at the time and needed to money to pay the heat and water bill (I was unemployed at that time), I took out the loan, knowing I could never repay it. 10 days ago (1/17) they reposessed my vehicle. I received a notice stating I have 15 days from reposession to pay an amount of $2100 and some change to get the car back. Is there anything I can do to get this reduced or delayed? Can I hire an attorney? I don't know what to do. While I should have NEVER taken out the loan- they shouldn't have given it to me with an income of $380 per month. Any assistance you can give would help me out. Thank you!! Laurie H.
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      I am not aware of any recourse available to you. Title loans do not require an income verification, to my knowledge. It is up to the borrower to use his or her judgment, before taking out such a loan that places the car at great risk. I understand you were in a desperate state, as you needed to keep your heat and water on, but believe the only way to get your car back is to pay them what they are asking.

      You can try speaking with your state's Attorney General's office, consumer protection division, but I am not sure that they can do anything to help you.
      0 Votes

  • 35x35
    Jan, 2012
    Kara
    I have a title loan in TN, and I was wondering how I go about giving my car over to the lenders? I am getting a new car and my current vehicle is a lemon. I have $400 left to pay on my loan and I am sure my current car is enough to pay it off. I was just wondering if I could just drop it off at the Title Loan office and just be done with them.
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      Read the Bills.com article to learn more about voluntary repossession. Given the costs of voluntary repossession, you may be money-ahead by paying-off the loan and selling the vehicle on your own. What is the Blue Book value of your vehicle? Your creditor may not agree to take the car. They will most certainly want to guarantee that the full amount of loan will be repaid.
      0 Votes

  • 35x35
    Sep, 2011
    michael
    I need some legal help, my fiancee took out a title loan and we where in default after the first month!!! however we tried to make a partial payment and they refused. I learned after they repoed our car that A) the repo company violated laws getting the car, and B)the title loan company should have set us up with a payment plan. How can I get some help, obviously I dont have the money for an attorney.
    1 Votes

    • 35x35
      Sep, 2011
      Bill
      See the Legal Services-funded programs with Web sites page to learn how to find no-cost legal services in your area. Alternatively, call your county bar association, and ask for the names of the organizations that provide no-cost legal services to low- and no-income people in your area. Make an appointment with your Legal Services or other organizations, and bring all of the documents relating to your title loan to your meeting. A lawyer will advise you accordingly.
      1 Votes

  • 35x35
    Sep, 2011
    Kim
    I live in Texas. Took out a title loan on my truck but I am still paying my finance company. The payday loan place gave me the loan without the title and are now threatening to repossess. Can they? I have already paid them over $2500.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      I can't give you legal advice, but will share some thoughts with you.

      I am not clear if you are speaking about two separate loans, a payday loan and a title loan. If that is the case, then the title loan is a lien on your vehicle and the payday loan is not. The payday lender, in this case, could sue you and come and pursue collections if it won a judgment against you, but can't take your car.
      0 Votes

  • 35x35
    Aug, 2011
    Gary
    Bill, In Wisconsin can the payday loan store still reposes my vehicle, I know some laws have changed here in Wisconsin and I am trying to find this out, hope you can help me. Thanks, Gary
    1 Votes

    • 35x35
      Aug, 2011
      Bill
      Gary, did you sign anything that pledged your car as security for the loan? To my knowledge, you car can't be repossessed by anyone other than a lien holder.

      I suggest that you consult wtih an attorney in WI, to see your delinquent loan could lead to a seizure of your vehicle and a forced sale, which is not quite the same as repossession.
      0 Votes

  • 35x35
    Jul, 2011
    Takeila
    I live in the state of Illinois and took a title loan out on my car 7 months ago. I've never missed a payment and I called this month to inform them I would be 7 days late on my payment. I was then informed that she could give me 3 days and that's all. My question is here in Illinois can they just come take my car so soon or is there a process to repossess?
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      As the Illinois Department of Financial and Professional Regulation states, "When you borrow the money from a title loan company you sign a contract that says, 'I will pay back the money I borrowed or you can have my car.'"

      I can't find a time limit they are required to give you for a grace period on a missed payment, before they come to take your car. You should do everything you can, in my opinion, to get the money to pay them withiin the 3 days, such as borrowing the money from another source.
      0 Votes

  • 35x35
    Jul, 2011
    kris
    I live in Texas & my question is, Would i to pay anything extra if my truck is repoed? I have not had a chance to pay on it due to I am self employed & sales have been extremely low. What should I do?
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      Please see the Bills.com resource Voluntary Repossession, and in particular, read the reader Q&A that follows my original answer. I think it would be safe to say Bills.com readers and I have discussed just about every issue surrounding vehicle repossession on that page.
      0 Votes

  • 35x35
    Jun, 2011
    DepressedDebtor
    What's the law in Texas regarding repossession of a car after default on a title loan? My loan was for $500. I missed a payment & now I owe a little less than $700 plus $350 repo fee. I have 15 days from repo date to pay a mininum payment of $650 with $250 of it going only to interest! The car needs a lot of work, so it makes no sense to me to pay it off and still have to invest more into it. Will this repo be reported on my credit? And, if they sell it, and there remains a balance that I owe, can that negatively affect my credit (assuming I'm making payments on the balance)? Please help! I don't know what to do!
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      First, see the Bills.com resource Texas Collection Laws for a general overview of your rights and liabilities. Second, see the primary (but not only) Texas statute on secured debt, which is Business And Commerce Code, Title 1. Uniform Commercial Code, Chapter 9. Secured Transactions.

      There is no easy yes or no answer to your question about the impact of a repossession on a credit score. Some auto lenders report data to the consumer credit reporting agencies (called credit bureaus). Some do not. Most banks do. Most buy-here-pay-here dealers do not. The only requirement is if a creditor makes reports, the reports must be accurate.
      0 Votes

  • 35x35
    Feb, 2011
    CHARLENE
    I made all my payments on my title loan until there no longer was a title loan available. I then was asked to go from paying 375.00 a month to 472.00 every two weeks due to them no longer being able to make me pay on a title loan. I couldn't afford it and now they are trying to repo my truck. what can I do?
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      The situation described confuses me. Please take all of the documents relating to this title loan or loans to a lawyer in your state who has experience in consumer or contracts law. He or she will review these documents, and advise you precisely.

      If you cannot afford a lawyer, call your county bar association and ask for the name of the organization in your area that provides legal services to people with low or no income. Make an appointment with that organization, and bring all of your documents relating to the title loan to your meeting. A lawyer will advise you accordingly.
      0 Votes

    • 35x35
      Mar, 2011
      Chris
      Charlene is asking this question from Wisconsin, where title loans were seriously scaled back and it is now ILLEGAL for a title loan company to repo your car. When the new laws were passed, which took effect in Dec. 2010, title loan companies in Wi scrambled trying to convince people to pay off the entire loan in one payment, and only gave you like a week to do it. Well, the fact of the matter is that since they couldn't hold up their part of the original contract, being the part where they offered "unlimited rollovers", telling customers that they could just pay the interest and keep the loan indefinitely, THEY BROKE THE CONTRACT with all of us, thinking their predatory lending practices would fly under the radar forever. The place where I got my loan has since shut their doors and doesn't have a working phone number. So, they are all scrambling now to find out what they can do to regain their losses, but the fact of the matter is that if someone tells you they are coming to get your car, it's just an empty threat. As far as getting your title back without a lein, its a different story, but at least you can run the car into the ground while you save for another.
      0 Votes

    • 35x35
      Oct, 2011
      Sarah
      Chris - are you a lawyer? How do you know that this is illegal?
      0 Votes

    • 35x35
      Oct, 2011
      Chris
      No, I'm not a lawyer, but I read a lot on this particular topic and I'm still driving the car in spite of everything the title loan company told me. Now, they can repo your car if you're leasing and don't make your payments, but the governor's office deemed the old title loan practices to be predatory on a class of people who can't afford to pay back at such high rates. Because of this, some places had to start doing other loan types and had to restructure their business to be compliant with the new regulations. The company I had my loan through has gone out of business, but the contract loans were sold to an out of state firm which is a fairly common practice in these situations, but while my credit has been damaged by my non-payment, the fact is that when you sign with a loan company, you are both bound to the agreement. My title loan offered me UNLIMITED ROLLOVERS when I went in to get it, and a few months later, they were screaming at everyone trying to get people to pay while they still could, and in the process they broke their own contract by telling people they either had to pay the ENTIRE LOAN AMOUNT in 3 days and they would accept no partial payments, and of course to rollover the loan again would be illegal as well as impossible since they were going out of business and finding new jobs. So, worst case scenario is to hope they DO repo the car so I can follow up with a small claims suit for the blue book value of the car. I don't know about everyone else's loans, but the one I had was the type of loan that was shut down by the old governor. And on top of it all, it's only a 12 year old car worth 1500 and a loan for 700 from them, so it's not even worth it for them anymore, especially since I don't have my title anymore, I'm doing little more than putting gas in it while I save my money for a new car. Another couple months like this, and I'll be calling them for a "voluntary" repossession (which they still could do), just so I don't have to pay to have it towed away. No, I'm not a lawyer but it's been almost 2 years since I defaulted on the loan, and I've already saved enough money to buy a brand new car from the dealership and pay cash for it on the spot. I think I'll run this one into the ground first though... :)
      0 Votes

    • 35x35
      Nov, 2011
      Sarah
      Do you know where I can check on this?
      0 Votes

    • 35x35
      Nov, 2011
      Bill
      I can find no statute that outlaws title loans in Wisconsin. Readers, please cite the Wisconsin statute or case laws that outlaws Wisconsin title loans below.
      0 Votes

    • 35x35
      Nov, 2011
      Eddie
      Sarah just so you know the vehicle is not safe, I am a repo agent for most of the title loan companies in Wisconsin, if the loan was taking before the cut off date in December and you are in default they can take the vehicle, and title loans are legal in the state of Wisconsin again.
      0 Votes

    • 35x35
      Nov, 2011
      So you're telling me after the cut-off date they can not repossess your vehicle?
      0 Votes

    • 35x35
      Jan, 2012
      Tami
      I have a title loan and have been a late a few times on the loan but I do send them what I can when I get paid and then the phone calls stop and they don't call me again until the next due date.....they are taking payments and not refusing my partial payments as of yet.... they do call me EVERYDAY looking for payments and like I said I do send them what I can and the accept it ....now aren't they suppose to refuse the payment unless it is a FULL monthly payment?? Please help with this.
      0 Votes

    • 35x35
      Jan, 2012
      Bill
      The creditor is obliged to take payments, including partial payments, as agreed upon in your written contract and subject to state laws. Keep making the payments. If you have legal questions then contact a local attorney.
      0 Votes

    • 35x35
      Jan, 2012
      Mike
      Sure am glad I found this site. A friend/roommate of mine is in a unique situation with this one in Wisconsin. He took out a title loan for $1,000 in 2004 on his Blazer. Wisconsin title loans took him to court for replevin in Nov of 2004, but did not repo the vehicle immediately. The truck went in a ditch, hit a culvert and rolled, and was totaled. He sold the crashed truck for parts to a co-worker for cash in January of '05. On 1/12/12 received a letter saying he owes over $19K, but will settle for $600. He needs to respond to them "now" or they will execute their rights under "the law" to liquidate any collateral securing the agreement. He claims they have not contacted him for years. If he no longer has the vehicle, what can they repo? Isn't this already beyond the statute of limitations in Wisconsin? Any advice would be appreciated.
      0 Votes

    • 35x35
      Jan, 2012
      Bill
      You are correct that there is no car to reposess. However, the creditor may be able to pursue other means to collect on money that is owed after the vehicle has been sold or no longer exists. The state of Wisconsin allows 20 years for a judgment. They are certainly offering a small amount for the settlement, but your friend should be careful the settlement agreement preserves his or her rights. Wisconsin's statute of limitations law is somewhat unique in the rights it conveys to Wisconsin residents. Tell your friend to consult with a Wisconsin lawyer experienced in civil litigation to get precise answers to your questions whether the statute of limitations has passed.
      0 Votes

  • 35x35
    Jan, 2011
    Carla
    Can a state intercept your state income tax due to non payment of title loan?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      State tax returns can be diverted to pay off delinquent state or federal taxes, other debts owed to the state or federal government (overpayment on unemployment or social security, for example) delinquent student loan debt, and arrears for child support. I am not aware of a state that permits state tax refunds to be diverted to a creditor attempting to collect on a vehicle title loan.
      0 Votes

  • 35x35
    Dec, 2010
    lillian
    i need some one to help me do a consolidation on my title loan. if u know any info please let me know.....
    0 Votes

    • 35x35
      Dec, 2010
      I am not aware of any companies refinancing or consolidating vehicle title loans. If there are any, be vary cautious about the terms offered.
      1 Votes