Those feeling a financial pinch and hardship may undertake a title loan to stay afloat.
In this scenario, a person places their car’s title as collateral to meet the loan requirements. Yet, this doesn’t rid the underlying financial issues – which may turn to tougher times ahead. Financial mishaps and mismanagement may have the person defaulting their loan.
How can one avoid defaulting on a car title loan? What options are available to stay afloat and keep the car? Read on for answers.
How a Title Loan Works
Auto title loans are short-term loans featuring quick turnaround times and easy approval.
Here’s how it (typically) works:
- A person applies for a title loan and places their (owned) vehicle title as collateral
- A lender, if they approve, deposits money after the person agrees to the terms and conditions
- The person pays the loan (usually within 15 to 30 days) until the agreement is satisfied
If it all sounds simple, then that’s because it’s a rather typical loan process. Except, the terms are shorter and you get to keep your vehicle.
The Dilemma with Car Title Loans
A title loan offers short-term capital, but it doesn’t remove underlying financial issues. Almost 80% of each generation is in some form of debt. There are issues that may occur without first dealing with monetary problems.
The dilemmas include:
- Endless Debt — Taking on more debt and causing more financial strain each month
- Repossession — Defaulting on the loan could have the debtor repossessing the car since it acted as collateral
- Job Loss — Losing the vehicle may prevent the person from going to work, causing more trouble
Of course, all debt isn’t bad especially if the person has a plan and practices good money management. As you might know what happens if you default on a title Loan, there are smart tips you can try to avoid such situations.
Strategies for Avoiding Auto Title Loan Defaults
Consider the fallout of defaulting on one of those instant online title loan offers. What could one do to avoid losing their vehicle and the chaos that ensues afterward? Well, they should try one (or all) of these strategies:
Talk With Them
Financial stability is sometimes unpredictable and turbulent.
It’s important that communication stays open between the parties. It’s crucial that the debtor knows what’s happening. This transparency could have the debtor offering flexible solutions versus aggressive repossession.
Likewise: Offer a partial payment to at least show a commitment.
Bring up the suggestion to renegotiate and/or refinance the loan.
The principal will typically remain the same. But new terms and conditions could turn favorable. The renegotiation could lead to an extension, allowing the person to get back on track.
Explore Debt Relief
The title loan may be one of several debts.
There are debt relief options that take on most (if not all) debts. This could consolidate debts into a single payment from the new debtor. Many find this option more manageable versus juggling several debts.
Bring in More Money
It’s not always as easy as it sounds but increasing one’s earning power can and will help.
- Getting a raise
- Taking on a side gig
These offer quick turnaround for earning extra capital, providing enough to avoid defaulting
Get Guidance from a Financial Professional
There’s a lot to deal with when finances get chaotic. Many tend to shut down and attempt to avoid issues. Succumbing to the hardships means loss of the vehicle and all other fallout resulting from it happening.
What can one do if their title loan is too overwhelming and about to default? Talk with the professionals. Trust in the years of experience professionals have and offer. Work with them to stay afloat.What else can one do to gain better money management? Discover and read more money blogs here on the site!