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What happens if you default on a car title loan?
I took out a car title loan on my vehicle a few weeks ago to help cover rent, but I don’t think I will be able to make my payment this month. What happens if you default on a title loan?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Car title loans use your car as collateral, so if you default on a car title loan, the lender can repossess your vehicle.
However, most lenders do not start the repossession process immediately: If you miss a payment, many lenders will give you the option to extend the term or pay back the loan with additional penalties and fees.
Depending on your state, laws may require title loan lenders to give you advance notice before repossession. Check your loan agreement for information about your loan payment’s grace period, too.
Keep your lender in the loop: If you know you’re going to default, contact the lender immediately to discuss your options. More often than not, the lender will allow you to extend the loan repayment period without any hassle other than a bit more money.
Keep in mind: With costly monthly fees and a high APR, car title loans can be challenging to repay, cause immense stress about losing your vehicle, and can easily lead you into a cycle of debt. Only use them as a last resort.
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- Gregory R.
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