Another possible way to pay off a car title loan is with a credit card cash advance. If your credit score has improved since you took out your original loan, you may be able to get a lower interest rate by refinancing. You can typically only get a title loan if you own the car free and clear. Thanks to all authors for creating a page that has been read 67,190 times. Results will vary. Written by Chiara King.Updated November 28, 2021, Car title loans are a quick and easy way to get cash in a hurry by using your vehicles title as collateral. Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet's "Smart Money" podcast. Even aconvenience check from a credit cardcan reduce your costsas long as you arecertainyoull pay it off before any promotions end. Experian and the Experian trademarks used herein are trademarks or registered trademarks of Experian and its affiliates. This may result in a collection account being added to your credit history. Some states require title loan companies that repossess and sell your car to pay you the difference between the sale price and the amount of your loan. Heres how to voluntarily surrender your car. These loans are based on your cars value, not a credit check, so you dont have to go through a traditional loan approval process to get one. But DMP participation may indirectly affect your score by reducing your available credit. The exact amount you can borrow also depends on your state, but in general, you may qualify for anywhere between $2,600 to $10,000. The lender may then sell the car and apply the proceeds to the amount you owe on the loan. While maintained for your information, archived posts may not reflect current Experian policy. There is usually no credit check, but the title loan company must actually see the vehicle in person. These loans are based on your cars value, not your credit, so you dont need to go through traditional loan approval processes to get one. If your lender repoes your car, they will likely sell it at an auction, and you will likely receive very little of the proceeds from the sale. Tiffany Lashai Curtis is a lead writer for the core personal finance team at NerdWallet. If that's the case, then having a voluntary surrender in your credit history will likely impact you for some time. His writing has appeared in The New York Times, USA Today and elsewhere. You could use websites or social media to sell your property, or you could take the more traditional route and have a garage sale or yard sale. Transfer your car loan payments. If youre behind on your payments, your creditor may already be reporting your delinquency to the credit bureaus. The law is also subject to change from time to time and legal statutes and regulations vary between states. Another benefit to voluntarily surrendering your car is that you can drop it off at your convenience. She has over 5 years of experience reporting on issues that affect marginalized communities. Develop the tech skills you need for work and life. At 30 days, you would owe a total of $1,000. will make the credit damage from the repossession worse. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. What Is a Car Title Loan? -Be sure to compare interest rates from multiple lenders before you decide to refinance. By taking the time to explore your options, you may be able to get out of a car loan you cant afford and improve your financial situation. Getting a paycheck cash advance from your employer. Use Experian Boost to get credit for the bills you already pay like utilities, mobile phone, video streaming services and now rent. Voluntary Surrender on a Credit Report. Surrendering your vehicle and repossession, The Most Popular Cars People Are Financing in Every State, How Credit Report Disputes Affect Your Credit. While this is not a guarantee that the loan company is reputable, it is far better than obtaining a loan from an unregistered company. There are many online lenders that offer either bank loans or peer-to-peer loans, and some online lending sites will tell you upfront if your credit score is high enough to qualify. To qualify for a car title loan, the borrower must either own the vehicle outright or owe very little on it. Used-car prices have been high since early in the COVID-19 pandemic, so you may be able to sell your car and get enough to cover your loan in full. Explore our free tool. What Are My Rights Under the Military Lending Act. Combining direct services and advocacy, were fighting this injustice. Just as with involuntary. The . What Happens if I Voluntarily Surrender My Car. Participating in a DMP shouldnt have a direct impact on your credit score. An applicant can usually simply drive to a store providing title loans and leave with the loan proceeds in 15 to 45 minutes. Here are six options for legally getting out of an auto title loan, plus a few tips to protect your finances. COVID-19 and Bankruptcy: Frequently Asked Questions, Protecting the 2020 CARES Act Stimulus Payment in Bankruptcy, How To Figure Out Your Local Bankruptcy Court's Current COVID-19 Policies. In some cases, you may be able to work out a deal with your creditor to get behind on your payments without damaging your credit score. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Some lenders allow you to voluntarily surrender your vehicle to close out your loan. Pay rent online? Be sure to contact your lender first to see if this approach is allowed. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free. State law determines your redemption rights prior to a sale, how and when the lender can sell your vehicle, and whether you can be pursued in court for any loan balance that is left over after the sale (known as a deficiency balance). It can help you avoid personal liability for adeficiency judgmenta legal judgment declaring you must pay the difference between the value of the car and the amount you still owe on the car. What Is Chapter 7 Bankruptcy & Should I File? When you surrender the vehicle, you return it to the lender on much more positive emotional terms, usually during business hours. His writing has appeared in The New York Times, USA Today and elsewhere. Some states dont allow these loans at all. This compensation may impact how, where, and in what order the products appear on this site. Title lenders and other predatory lenders often target military servicemembers. Without large monthly payments, more of your finances are free to help you get back on your feet and improve your credit. Your daughter can not legally encumber the car with this loan on her own. Debt collection agencies specialize in buying debt from companies that don't want to collect it, including companies going out of business. Before Sean lead podcasting at NerdWallet, he covered topics related to consumer debt. If youre considering voluntarily surrendering your car, its important to weigh your options and make sure you understand the implications of doing so. Among other protections, the MLA prevents service members from being charged an interest rate of more than 36% or being assessed a penalty for repaying a loan early. All financial products, shopping products and services are presented without warranty. If you extended that loan for another month, at the end of the additional 30 days you would owe $200 more in interest, for a total balance of $1,200. When you voluntarily surrender your vehicle, the title is transferred back to the lender. With a focus on thoughtful and actionable money advice, Sean provides real-world guidance that can help consumers better their financial lives. The following ideas may help you do that. But if there's any way for you to (legally) gather the money to pay off a title loan, you should do it. Chiara King is an attorney located in central Michigan and licensed in both Michigan and Maryland. Posts reflect Experian policy at the time of writing. If you currently have a title loan, the best thing to do is to get out of it quickly. What to Do and What Not to Do Before and After Car Repossession, Latest Auto Loan Interest Rate Increase Updates, Some Insurers Won't Cover Hyundai, Kia Models, 4 Options When Youre Over Miles on a Car Lease. In states where they are allowed, these loans typically have a term of 30 days. The creditor will resell the vehicle, and youll receive a statement with the details of the sale. About the authors: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. from the University of Maryland Francis King Carey School of Law. Some users may not receive an improved score or approval odds. For example, there may be a way to lower your interest rate or make other adjustments that lower your payments. "Pennies on the Dollar: Reallocating Risk and Deficiency Judgment Liability," Page 252. In contrast, if you voluntarily surrender your car, you may be able to negotiate a settlement with the lender that allows you to keep your car and work out a payment plan that you can afford. A title loan uses your vehicle title as collateral. Chiara King is an attorney located in central Michigan and licensed in both Michigan and Maryland. Although a financial institution determines the loan terms, the title loan process is similar to payday loans as you need to repay them within 30 days. A Debt Management Plan: Is It Right for You? When evaluating offers, please review the financial institutions Terms and Conditions. When a recovery company is hired to tow your vehicle away, someone has to pay for that (hint: its not your lender). Is this a legitimate service? Once you click apply you will be directed to the issuer or partner's website where you may review the terms and conditions of the offer before applying. Chapter 11 or Chapter 13 Bankruptcy Can Help. Defaulting on a loanwill damage your credit, and your lender will eventually repossess the car. In the long run, making regular payments that reduce your debt through a DMP should improve your credit. You'll also have to pay certain fees. Many title loan companies will manage the process of reporting the discharge of the loan to the appropriate agency, as well as arranging for you to receive an updated title. Get a free bankruptcy evaluation from an independent law firm. Check to see whether you qualify for options that would allow you to keep your car, like a repayment plan or more time to make a payment. Downgrading to a less expensivebut still safevehicle could save you hundreds or thousands in interest and fees. How does a personal loan impact your credit score? One way to get out of a car title loan is to pay off the balance as quickly as possible. Ideally, youll want to do this before you fall too far behind on payments. It may be possible to have someone else, like a parent, assume responsibility for your car by transferring the loan to them. Your best bet is to avoid title loans in the first place. When this is the case, call ahead and ask an agency official what other documents, such as loan agreements or proof of identity, must be brought in along with the release documents. Learn more. At TitleMax, your car title is your credit. Is Upsolve real? Save my name, email, and website in this browser for the next time I comment. Its OK if you can pay only the minimum payment amount. I've come to the collusion that Titlemax is a glorified torcher chamber! For example, for an $800 loan at 25% interest over a 30-day term, the APR would be 25% x 12 months = 300%. In most cases, this process is a very simple one that requires making payments on time and making sure that, once the debt is settled, the title loan company properly reports the activity and removes the lien on your vehicle's title. It's one of the greatest civil rights injustices of our time that low-income families cant access their basic rights when they cant afford to pay for help. Repo companies can take your vehicle from almost anywhere. The lender will resell the vehicle, and the proceeds will go toward the balance you still owe on the loan. If you're struggling to make your car payments, there may be alternatives to voluntary repossession. Car title loans, often just called title loans, also are short-term loans.