Title Loan Defaults And Jail – What Is Possible
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. They can get money for an unexpected expense and most customers qualify for at least $1,000. Once they receive the loan proceeds, they will 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?”
In short, they won’t go to jail and can’t be prosecuted for failing to pay a title loan or any personal loan, but there are things to know for anyone in this situation. 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 their loan back over a period of 6 months to 3 years, and we all know that anything can happen during that time. Period. For example, if you financed a vehicle, you must make the payments on time to avoid losing it; inevitably, things come up, such as getting let go from your job or facing unexpected expenses. Lenders typically require proof of income as a primary requirement for title loans over $1,000, and you’ll need to verify that you’re currently working and can afford the required monthly payments.
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 usually much more than what you would spend on a credit union or bank loan. 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 similar to these are 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. A notice needs to be sent out about this action, and your title loan company must follow state and federal regulations if they intend to collect on a debt and repossess your vehicle. 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.
Contact Car Title Loan Lenders USA at 866-515-9866 if you ever face a situation where your vehicle can be repossessed. We won’t be able to help get your vehicle back if it’s already up for sale at auction. However, there are things we can help you with, such as a refinance or title loan buyou,t that may avoid the possibility of losing your vehicle for good.