Title Loan Repossession
Your car is what allows you to get a car title loan, but this also means that your car is what’s at risk should you fail to fulfill the terms of the loan. While a title loan repossession is a rare occurrence, it is something to be aware of so that you can avoid it. Here’s how a title loan repossession works and how you can make sure that a lender doesn’t repossess your car, even if you can’t pay your title loan off in full when it’s due.
How Does the Repossession Process Work with Title Loans?
Like many aspects of vehicle title loans, repossession varies in each state, because each state has its own set of title loan laws. This is how the repossession process generally goes:
- The borrower defaults on their car title loan by failing to make a payment.
- The lender gives the borrower any grace period or notice required by state law.
- The lender sends someone to repossess the car.
- The lender sets up a date and time to put the car up for sale.
In some states, the laws require zero notice and no grace period at all, which gives the lender the right to repossess a car as soon as the borrower defaults. Said lender could then sell the car just as quickly.
Other states have more borrower protections in place. For example, title loans in Tampa follower Florida’s title loan laws, which have several protections related to title loan repossession. These include:
- A mandatory 30-day grace period after a title loan default for the borrower to catch up on their missed payment
- Advance written notice before a lender can repossess a car
- After repossession, written notice at least 10 days in advance of a car sale, and the notice must include both the amount owed and details about the sale
These are some of the strongest protections against title loan repossession in the United States, but there are other states with protections of their own in place.
Now, if your car ends up getting sold after a repossession, state law also determines what happens for any deficiency or surplus balances. Here are the possible scenarios:
- The proceeds from the car sale match what you owed the lender – No further action is needed
- There’s a deficiency (the proceeds didn’t cover what you owed) – Some states allow the lender to bill you for the deficiency, while others do not
- There’s a surplus (the proceeds covered more than what you owed) – Some states require the lender to send you the surplus, while others do not
Can You Avoid a Repossession?
No one wants to get their car repossessed. The good news here is that you can usually extend your vehicle title loan to keep the lender from repossessing your car.
While the amount due on a title loan is whatever you borrowed (the loan principal) plus any fees and interest, lenders will often let you pay them only those fees and interest to extend your car title loan. You then get another term added to your loan with the principal, plus the same amount of fee and interest charges as before.
Extending your title loan over and over will cost you quite a bit in fees and interest, but it’s a convenient option to have when money is tight. Just make sure you’re aware of the term limit on title loans in your state. Some states cap how many times borrowers can extend title loans. Once you’ve hit the maximum there, you won’t be allowed to do anymore extensions.
There is also a way to get your car back after a repossession takes place. To do this, you need to pay the lender whatever you owe them before they sell your car. This amount could be higher than what you owed on the loan, because the lender will also likely tack on any repossession and storage fees they incurred. Another option would be to buy your car back when the lender sells it, although this only works in states where the lender must give you details on an upcoming car sale.
Considering how simple it is to extend a car title loan, repossession typically isn’t something to worry about. Play it safe by reading up on the rules and regulations in your state and being careful not to default.