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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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In this article:
  • 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
    Howard,
    Apr, 2020

    I defaulted on title loan 9 years ago in Utah. They never reloaded the car. How do I junk the car now?

    • 35x35
      Daniel,
      Apr, 2020

      Howard, I can't give legal advice, as only an attorney can properly do so. Here are a couple of thoughts, with the understanding that I am not giving you legal advice.

      I am guessing you intended to say that they never repossessed the car. I don't think a junkyard will scrap the car or take it for parts without you showign title.

      I see your options as:

      Keep calling them to get them to take the car. The debt you owed has almost assuredly passed the statute of limitations, which means if they haven't sued you already, you could defend yourself by using the SOL as a defense. Don't pay the $1 if they try to get you to do so, as you restart the clock on the SOL.

      Drive the car on their lot and leave it and the keys. Please check with an attorney doing that doesn't expose you to harm before trying that strategy.

  • 35x35
    Sergio,
    Jan, 2020

    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

    • 35x35
      Daniel,
      Jan, 2020

      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?

  • 35x35
    Thomas Armstron...,
    Jan, 2020

    Can a title loan in Texas serve me?

    • 35x35
      Daniel,
      Jan, 2020

      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. 

  • MR
    mary,
    Apr, 2017
    I live in Douglasville Ga I have a title loan i got behind can they bring the police to your house for a repossession
    • 35x35
      Daniel,
      Apr, 2017

      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.

  • JW
    Jordan,
    Olivette, MO,
    May, 2014
    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?
    • BA
      Bill,
      May, 2014
      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.
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