Title loans are a great alternative for those who have poor credit, a car, and a need for money. They’re designed to work simply. Someone who has a car with a clean title applies for a title loan. They’re approved for an amount determined based on the value of the vehicle, and they turn in their title to take out a loan. Once the loan is repaid in full, the lender returns the title to the borrower. If the borrower defaults on the car title loan, the car is repossessed and the borrower is left without a vehicle. Many people are well-versed on title loans, and others are either entirely unfamiliar or have a gross misconception of what title loans really are. These facts might just surprise you.
The Borrower Keeps the Car
Many people are hesitant to borrow money using a title loan because they don’t want to give up their car. The law states that people aren’t required to give up their car. The lender only takes the title, and the borrower gets to drive their car while their loan is outstanding.
The Inability to Pay Doesn’t Always Mean Repossession
If you borrow money from a title loan lender and you’re unable to pay the loan in time, you won’t necessarily lose your vehicle. Many lenders work with their customers to extend the terms of the loan to provide borrowers with the ability to repay. Lenders do this to earn more interest from the borrower, and it’s quite profitable for them to work with the borrower.
Lenders Must Offer Borrowers Specific Rights
Borrowers are protected in many states. If a borrower fails to repay their loan on time, state laws in many states require lenders to call the borrower to provide them with a date and time to turn in the car. This is to avoid the cost and excessive embarrassment of going through professional repossession. If the borrower fails to turn their car in on time, then the lender is legally obligated to hire a repossession company to pick up the vehicle.
Borrowers Can Get Their Car Back
Some state laws allow borrowers another chance to repay their loan in full even the car is repossessed. Florida law, for instance, requires all title loan lenders notify borrowers that their car is being sold at least 10 days before the auction to allow the borrower a chance to pay off their loan. If the borrower pays the loan in full, they get their car back.
Borrowers Might Get a Refund
If a car is repossessed and the lender sells the vehicle at auction, they get to keep the amount that pays off the outstanding loan. They must also pay any repossession and storage fees associated with the loss of the vehicle. If there is still money left over after paying all these fees, the lender is required to cut the borrower a check for the excess.