28 Jul 2021   /   0 comments

Can You Go to Jail For Not Paying a Title Loan?

Jail for Not Paying Loan

Wondering if you can go to jail over a title loan? Generally, you cannot be imprisoned for defaulting on a title loan. However, there are possible long-term financial implications for failing to pay.

Once in a while, you may have an urgent need for cash. It may be due to an emergency family situation, a pending loan instalment that might affect your credit score significantly, etc. For instance, it could be you had some major plans, like going on holiday or paying school fees, and your finances have gotten held for one reason or another. A title loan comes in handy on such occasions, offering a means to access quick and easy cash, regardless of your credit rating.

What Is Title Loans?

Title loans are secured financing that you can take against your vehicle. It’s usually a convenient financing solution whenever you need cash urgently. A title loan enables you to borrow against your car’s unattached value up to a certain percentage and pay back in monthly installments. As the lender can repossess and sell the vehicle if you fail to pay, your credit score doesn’t affect their lending decision.

A title loan is also termed as a pink slip loan. This is because the borrower surrenders the vehicle’s title (pink slip) to a financier in exchange for funds. The lender (lienholder) then adds their name to the title but allows you to continue using the vehicle.

How Does a Title Loan Work?

Usually, when you want to acquire a title loan, you visit a lender either at their physical office or on their website if they offer the loans online. The financier will require you to provide details of the collateral you’re providing (your vehicle) alongside other relevant loan application information. These may include your personal information, proof of residence documents, identification documents, references, proof of income documents, etc. However, the main interest is the vehicle details and the title. They will then do calculations to establish the vehicle’s equity value and communicate the fundable limit.

Upon submitting all the required documents, you can get the loan immediately. Different financiers have varying lending timelines. For instance, we disburse the funds in as little as 24 hours.

Ideally, title loans are suitable for people who need emergency funds, possess limited or no assets other than their vehicle, or have been turned down by other lenders due to poor credit ratings. Note that title loans aren’t restricted to car collateral. You can get a title loan against your motorcycle, truck, or even recreational vehicle (RV).

Like with other loans, it’s essential to choose your lender wisely. A reputable lender may be able to offer you favorable terms and provide repayment flexibility that does not strain you financially. Essentially, we offer a longer repayment duration, even up to 36 months, and you can borrow up to 85% of the vehicle value.

What Happens If You Default On a Car Title Loan?

If you default on your car/vehicle title loan, there are several possible consequences. The worst is that it puts your car at the risk of repossession. However, it doesn’t have to get to this. You can talk to the lender in advance and explain your situation to them. A reputable lender might offer a flexible repayment schedule that favors your current financial situation.

In case you fail to communicate your situation, the lender will send you a repossession notice, which in most cases may be about 30 days. However, if you go mute on the lender and are unreachable, they may shorten the repossession notice period by half.

During the notice period, you can make payments or reach an agreement and stop the repossession. But note that you might still be required to pay penalties for late repayment, alongside the regular installment.

Once the notice lapses, the lender will auction the vehicle to recover their money. Rarely do auctions raise the exact vehicle value. The car can be bought at a lower or higher value. Where the auction results in a shortfall, the lender will require you to pay up the difference. But if the vehicle sells over its value, you should demand the difference, which will be net of relevant sale costs.

If you find cash in the nick of time, you can walk to the auction grounds and redeem your vehicle. Nonetheless, even if you’re unable to buy the car, you should insist that it be sold at a fair market price.

How Can I Avoid Losing My Car?

As earlier mentioned, you should maintain open communication with your lender whenever you experience difficulties repaying your title loan. This way, you can agree on a flexible repayment plan and avoid the repossession process altogether.

Repossession is harmful in many ways. For example, if the car was your primary means of transport, then the impact can be significant. Again, it’s not good for your credit. Once the vehicle is repossessed, it reflects on the credit report and may stay for seven years. And don’t forget the added costs – penalties, sale costs, etc., that you’ll have to pay in addition to the principal amount and interest.

All these can be avoided by addressing the problem early. Once you hit a rough patch financially and it becomes apparent you won’t service the loan on time; you can approach your lender for refinancing. You can also do some legwork and research on financiers who may be offering better terms and inquire whether they can do a buyout.

Whichever option you choose, request a repayment plan that fits your financial situation, so you can keep up with the repayments as they fall due.


As much as you cannot go to jail over a title loan, default has a load of negative consequences. For example, interrupted transportation, negative credit, additional costs are all negative occurrences that follow default on a title loan. Hence, it’s essential to avoid getting into this situation by communicating with your lender early whenever you’re having repayment challenges. Alternatively, you can arrange for refinancing and get a new, more flexible facility.

If you have been wondering what happens if you default on a car title loan, we hope this article has provided sufficient answers. All the same, if you need a title loan or have one already and would like to refinance it through a buyout, reach out to us today and get approved in minutes!

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