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Collection on Title Loan

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Mark Cappel
UpdatedMay 14, 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

Did you know?

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.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Vermont, 16% have any kind of debt in collections and the median debt in collections is $1501. Medical debt is common and 5% have that in collections. The median medical debt in collections is $482.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.

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10 Comments

AAmber Oliver, Jan, 2023
I have a collateral loan with my car. They did illegal stuff. I don’t want to give them anymore of my money. They told me I could drop the car off to them personally or they can send it to collections. My question is where does my title go once it’s sent to collections? Do I pay the collection agency and them both the same price or does the collection agency get sent my title till I pay them back
AAmber, Jan, 2023
I have a collateral loan. Worth more than my car. They harass me and I want to turn my car in at this point. They gave all my account info to someone not on my account I don’t know what info they gave them but all my personal info and info on my account account number and everything. They said I can drop it off and pay what they don’t get at auction but they won’t come repo it at my house. They said they can send me to collections. Where does my title go once the loan is in collections? Do I need to oh collections and the lenders company or the collection agency is in possession of my title ?
RRichard heinze, Jan, 2023
My wife bout lose her car to auto pawn title my co worker told boss I worked for an said he wanted help get so we don't lose it at the auction he paid $900 I drove back to store (he store convience store owner no title pawn license)I ask him how much I owe him he said same $900 no papers no contract just agreement by mouth all pay 900 no time was discussed he then cut my hrs back 15-10-5 hrs next 5 wks I ask him how I pay u back he said he ain't gonna pay me to turn around give me my money back I'm not paying for it get a FUCKING job exactly what he told me an when day I parked at store he took keys out ignition an said he gonna keep car well I finally came up money 2mos and on Fri day I ask him what I owe him he said $900 he kept denying my paymrnt from cashapp, paypal, 4 times from debit cards he 2antex cash because of taxes so I came in Monday with $900 cash he said no now u owe me $700 more for he already changed title over got tags and and driving it an found out from vo worker he giving to daughter to drive on her bday was the plan all the time told anutta co worker bought ve interesting in selling hr told them he ain't saying he ain't do anything except let it sit there for me an my wife see it everytime we come by<spoiler>
SSally, Sep, 2020

If defaulted about 6 years ago and never repossessed the car .it was junked cuz it broke down. Can they repo a car that I'm financing? It's not on my credit report either.

DDaniel Cohen, Sep, 2020

Sally, I am not a lawyer, so please do not consider anything I share legal advice.  
I don't know your state of residence. It is possible that the statute of limitations expired on the debt, but that doesn't mean the lien the finance company had is no longer applicable. I think you will not be able to transfer the car into your name without the finance company releasing their lien. It seems unlikely they would repossess the car, at this time, never having made an effort to do so. If you have a lump sum that is 25% of what you owe, you could see if they would accept it as a settlement. If they agree, get something in writing before you pay them that specifies that the debt is paid and title will transfer to you, upon receipt of the negotiated settlement.

TT Trice, Sep, 2020

Hi im in state of Ga. My deceased son had a title pawn, year ago went inti default I am over his estates and has contacted the title pawn company (lein on car plus car is on collection.) I have reached out to company to negiotate a settled amt. They agreed per phone call, i set up a secure one time payment debit visa card...oct 2nd...however i have asked twice to Send or submit me a letter offering of the settlement..as proof ...as of yet i have not recieved anything in writing from.them re my sons settlement or offer. Im believing that they are attempting to still try teposs the car behind my back even after making a verbal settlement offer. Is this legal and what can.i do...hire an attorney in my my.state? Please advise. Car in shop for repairs at current. Thank u

DDaniel Cohen, Sep, 2020

Trish, please accept my condolences on such a heavy loss.

If a creditor won't put in writing that the payment you make settles the debt and brings it to $0 balance, I think you have good cause to be concerned that they could take the payment and still try and collect more or come after the car. It may make a difference to get a lawyer involved, but it could make the lender less inclined to settle. I am not saying that it will, but anything is possible, such as them pursuing collection against his estate.

HHoward, Apr, 2020

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

DDaniel Cohen, 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.