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Collection on Title Loan

Mark Cappel
UpdatedMar 26, 2024
Key Takeaways:
  • Avoid a title loan if possible.
  • Title loans come with a high APR.
  • Repossession is probable if you fail to pay a 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?

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

Debt statistics

If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2023 was $17.503 trillion. Student loan debt was $1.601 trillion and credit card debt was $1.129 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Collection and delinquency rates vary by state. For example, in Nebraska, 16% have student loan debt. Of those holding student loan debt, 5% are in default. Auto/retail loan delinquency rate is 2%.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.

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