The problem with title loans is that many people struggle to make monthly payments. When they first take out a car title loan, everything is good. Once they receive the loan proceeds, they have a large amount of cash and make the monthly payment on time. The problems start down the road, usually after 3-6 months of making payments. As a result, they end up defaulting on the title loan payments. This results in the question, “Will I go to jail for defaulting on a title loan?” This article will answer this question according to the law, but before that, you must understand how instant online title loans work.
What Do Most Lenders Require Before You’re Approved For A Loan?
With most car title loans, you must provide some collateral. Instead of your proof of income, getting cash requires that you hand over a pink slip for two reasons. Your qualifications are often not based on your credit score. Like most short term loans, you can get cash once your application is approved. Car title loans work when you use a pink slip as collateral for a title pawn. In other words, as a borrower, you must own a vehicle. You also have to sign over ownership to an auto title lender. The company will often write the loan for up to 50% of the vehicle’s value. In case of default, they will also keep the pink slip for security.
A borrower usually has to pay within one month, and the loans can range from a small amount to a very high value. If you default on the loan, the lender can take your vehicle.
How Much Does a Car Title Loan Cost & How To Avoid A Default?
Most companies often require an average monthly salary of over $1,500. The amount you have to pay is high, often much more than what you would spend on a loan from a credit union or bank. In some cases, higher loan amounts are put in place for a high dollar amount title pawn. For instance, if you applied for a car title loan worth $2,000, you will likely have to pay a tenth of the monthly cost, equal to $200. In other situations, the loan fees will be lower, similar to what we see with registration and installment loans. You must determine the lender’s annual percentage rate (APR) if you borrow money for a year. Your borrowed money amount, fees, interest rate, and the period of money lending determine this. While there are some cases where an online title loan is your best option, more traditional forms of borrowing will likely work out best in the long run.
Will You Go to Jail if You Default On Your Online Title Loan?
Many worry about being mistreated by an online title loan lender once they fall behind. It happens in some places, but a lender cannot make threats under the law. Asset takeover by force, physical threats, or anything of similar measure is not allowed. The lender has to avoid running afoul of the state repossession laws.
Most importantly, you cannot be arrested for default when you apply for a title loan from Car Title Loan Lenders USA with your vehicle equity as collateral. You cannot face prosecution for not repaying your car title loan. The lender only has the power to take possession of your vehicle. There also needs to be a notice sent out about this action. Take note if a company threatens to take you to jail. In most cases, they could be sued for violating the Fair Debt Collection Practices Act.
How to Prevent Legal Troubles From A Future Title Loan Default?
Before you move forward with a car title loan, you should check out other financial resources first. It has been an ongoing myth that companies often charge their borrower high interest rates. As a result, many companies that offer online title loans have released offers with lower interest rates due to the competitive industry. Nonetheless, there are more dependable options than using your assets as collateral, such as the following:
- Savings Accounts
- Bank Loan or Credit Union
- Help From Family or Friends
- Credit Card
You could decide which of your options is best by determining the fees, APR, and payment terms. Also, consider what happens when you can’t make consistent monthly payments. In this case, that would be a repossession.
It is all about careful decision-making before taking that leap with a secured loan. Always decide based on what is best for you. After making the decision, compare the collection practices of all the top title loan companies.