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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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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.

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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

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  • 35x35
    Jan, 2020
    Sergio

    Can a title loan in Utah send you to collections if you default payment? or do they just send you to Court ? And repossessed the vehicle ? Or what is what I should expect due to non payment I already pay 3 times what my car is worth so I don’t really know what to do at this point

    0 Votes

    • 35x35
      Jan, 2020
      Daniel

      If you default on a title loan, they repossess the car, and a debt remains after they auction it, then the title loan lender can sue you to collect on the debt. Does that answer your question?

      0 Votes

  • 35x35
    Jan, 2020
    Thomas Armstron...

    Can a title loan in Texas serve me?

    0 Votes

    • 35x35
      Jan, 2020
      Daniel

      If you owe them money based on the language of the contract with them that you signed and how you fulfilled your obligations, then they are on strong ground to sue you. 

      0 Votes

  • MR
    Apr, 2017
    mary
    I live in Douglasville Ga I have a title loan i got behind can they bring the police to your house for a repossession
    0 Votes

    • 35x35
      Apr, 2017
      Daniel

      I recommend that you speak with the State of Georgia to get an authoritative answer. Please read this link about title loans at the Georgia  Department of Banking and Finance and then use the "Contact Us" link at the top of their page.

      0 Votes

  • JW
    May, 2014
    Jordan
    Olivette, MO
    Took out a $5,000 title loan last year in Missouri, and have missed several payments. The car is worth much more than the loan I took out. Can I get arrested or a warrant placed on me? I lost my job right after getting the loan and have yet to find employment. The vehicle is no longer working, just sitting. Embarrassed to call them. Any advice to offer?
    0 Votes

    • BA
      May, 2014
      Bill
      Your ignoring the situation will not make it any better, and will likely make it worse. Call the title lender and explain your situation, and ask if it offers a deferment payment plan for people in circumstances like yours.
      0 Votes

  • AT
    May, 2014
    Angeline
    Farmington Hills, MI
    I defaulted on a title loan I got in Virginia 7 years ago. I have since moved to Michigan and finally called the lien holder. She agreed to settle for 20%, which is good news. My question is since I am out of state and I cannot walk into the office and trade the money for my lien release, how can I be sure once I send the money, that I will actually get the title and she is not going to just apply it to my total loan as a payment? I know these places can be tricky. Can I request she fax me a letter with the agreement we made as proof before I send the money? What should I say or do?
    0 Votes

    • BA
      May, 2014
      Bill
      Request a written settlement offer before you send any payment. This is a "best practice" whenever a person reaches a settlement with a creditor. A fax or paper letter are considered interchangeable by most courts today. See the Bills.com article Key Terms to Look For In a Debt Settlement Letter for guidance on your settlement letter question.

      You mentioned a title loan, which usually makes the lender a lienholder on your vehicle's title. Generally, liens are not subject to a state's statute of limitations. That means if the statute of limitations for a written contract in your state is X years, and you do not make a payment on your vehicle's loan for X years plus 6 months, the lien is still in effect. The lien does not go dormant or expire when the statute of limitations for written contracts runs out. This means even if the lienholder does not pursue you to collect the debt, you need to pay-off the lienholder to sell or even junk a vehicle.

      There are two pieces of good news here, however. First, lienholders will sometimes settle a debt for less than the balance due, as is the case with your lienholder. B sure the language in the settlement letter makes it clear that your settlement payment is in exchange for them releasing the lien and giving you clear title to the vehicle. Second, the statute of limitations applies to deficiency balances. If the vehicle is repossessed and then sold, your state's statute of limitations starts on or about the date the lender sells the vehicle.
      0 Votes

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