How to Get Out of a Title Loan

John Doe

Auditor

January 10, 2023

3

min read

If you’re in need of fast cash, a title loan might seem like the perfect option.

Basics

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If you’re in need of fast cash, a title loan might seem like the perfect option. Title loans are easy to get and offer quick cash with no collateral or credit check. The catch is that there is a catch – high interest rates and expensive monthly payments that can add up quickly. Depending on your situation, there are ways to get out of a title loan and avoid accruing even more debt.

Know the terms before you get a title loan.

The terms of a title loan are not negotiable – it’s a contract, after all. You might want to take a calculated risk, but that doesn’t mean you can’t know what you’re getting into. Some key factors of title loans include: - Loan amount – The amount you can borrow varies based on factors like your income and your car’s value. Generally, the higher your car’s value, the more you can borrow. - Interest rates – Some states cap interest rates at 36%, but others go as high as 400%. Before you apply, check the state’s rate cap to see where you stand. - Types of title loan – You’ll have a few options: Payday loans, Installment loans, or Line of credit. Payday loans are due all at once, like traditional payday loans. Installment loans are due in monthly payments, and line of credit title loans let you borrow and repay as needed.

Repay your loan ASAP.

Title loans are high-interest loans that can lead to an even larger debt if you don’t pay them off as soon as possible. Generally, your lender will want their money back as soon as they can get it. As such, they’ll be very aggressive in trying to collect on the loan. The type of person who’d give you a title loan probably won’t show much mercy or understanding. Expect to face harassment, and be prepared to lose your car if you don’t pay. To the best of your ability, try to repay your title loan as quickly as possible. If you have other debts, try to pay those off first so you have more cash to put towards your title loan. Whatever you can do to repay your title loan faster will help reduce the amount you owe – and lower your interest rate.

Consolidate with a debt consolidation service.

Title loans are bad debt that quickly can get out of control. Bad debt can quickly snowball, especially if you don’t pay it off quickly. A debt consolidation service can help you get out from under your title loan debt. Companies that accept balance transfers, like Yendo, use your existing debt to get you a lower interest rate and put one payment in the place of several. This is a great option if you have title loan debt and other high-interest unsecured debt, too.

Find a better way to borrow money.

Title loans are a bad way to borrow money. They’re short term, expensive, and come with significant risk. Taking a title loan is basically a bet that you can get rid of your car as fast as possible, and then replace it with something new. These inherit risks, however, and they’re not worth it even if you do manage to pay off the loan in a timely fashion. If you need cash, try to find a different method. Many customers with a bad credit history are turning to Yendo. Yendo is a credit card that is based on your vehicle’s value instead of your credit score. Yendo helps build your credit score, has an affordable APR at 24.99%, and never checks your credit score during the application. 

Change your car’s title.

Many title loans are based off your car’s value. If you have bad credit and need a car, but can’t get a loan, consider buying a car that’s less than $2,000 and paying in cash. Make sure it’s insured and safe, but there’s no reason you can’t drive a cheap car as long as you have the money to buy it in full. Your car’s title will be in your name, and any title loan company will have no claim to it. You’ll render the title loan useless. The problem with this method is that if you’re ever in an accident or pulled over by the police, they’ll know you’re driving a car worth less than $2,000. They could impound the car, or ticket you and have it towed as a way to collect on the fine. This method is risky, but it may be worth it if you desperately need a car but can’t get a loan.

Take legal action against the lender.

If you take out a title loan and don’t think you’ll be able to pay it off, you can try to get it discharged in court. If you live in a jurisdiction that allows lawsuits like this, you’ll need to go to court and sue the title loan company. The exact action you take will vary from state to state, but generally you want to challenge the contract or the ability of the lender to collect on the loan if you can prove undue hardship. If you win, the title loan will be discharged, and you’ll have no further obligation. This is an extreme move and should be done with care and with the help of an attorney – but if you feel a title loan company has treated you unfairly, this may be an option.

Get a personal loan instead.

A personal loan isn’t as quick as a title loan, but it’s a better choice. Title loans often require no credit check and no collateral. Personal loans, on the other hand, require a credit check and collateral. If you have bad credit and need quick cash for repairs to your home or car, though, a personal loan might be a better option than a title loan. Personal loan rates are generally lower than title loan rates, and you’ll usually have a set payment plan and time frame within which to repay the loan.

Bottom line

A title loan is one of the worst types of loans you can take out. It’s quick and easy to get, but carries high interest rates. You may be able to get it without collateral and with no credit check, but you’ll pay for those benefits in interest and debt. To get out of a title loan, consider a debt consolidation service, finding a better way to borrow money, or applying for Yendo.