If you’re like many Americans, you may have taken out a title loan to help cover unexpected expenses. Title loans are a type of secured loan that uses your car as collateral. While these loans can be a quick and easy way to get cash, they also come with risks. One of these risks is what happens if your car is totaled and you still owe on the title loan. In this article, we’ll go over what you need to know about title loans, what happens when your car is totaled, and what your options are if you still owe on the loan.
You never know when an accident is going to happen. Unfortunately, it’s an all-too-common experience for many drivers. If you’ve been in an accident and your car has been totaled, it can be a stressful and overwhelming experience. What’s even worse is if you still owe money on your title loan. In this article, we’ll go over what you need to do if your car is totaled and you still owe on your title loan and what are the title loan requirements for this.
What is a Title Loan?
Before we dive into what to do if your car is totaled and you still owe on your title loan, it’s important to understand what a title loan is. A title loan is a type of secured loan where the borrower uses their vehicle as collateral. The lender will put a lien on the car’s title until the loan is paid off. Title loans are typically short-term loans with high-interest rates.
Understanding Title Loans and How They Work
Before we dive into what happens when your car is totaled, let’s first define what a title loan is and how it works. A title loan is a type of secured loan where the borrower uses their car as collateral. To get a title loan, you’ll need to own your car outright and provide the lender with the title. The lender will then give you a loan based on the value of your car. The amount you can borrow will depend on the value of your car and the lender’s policies.
Title loans are typically short-term loans, with repayment periods ranging from 30 days to a few months. They also come with high-interest rates and fees. The interest rates on title loans can be as high as 300% or more, making them one of the most expensive forms of credit available.
What Happens if Your Car is Totaled?
Now that we’ve covered what a title loan is, let’s talk about what happens when your car is totaled. When your car is totaled, it means that the cost of repairing it is more than the car is worth. In this case, your insurance company will declare the car a total loss and pay you the actual cash value of the car.
However, if you still owe on the title loan, the insurance payout may not be enough to cover what you owe. This is because the actual cash value of your car may be less than the amount you borrowed. This is especially true if you’ve had the loan for a while and have been paying mostly interest.
For example, let’s say you took out a title loan for $5,000 and have been making payments for a year. During that time, you’ve paid $2,000 in interest and have only made $500 in principal payments. If your car is totaled and the actual cash value is only $3,000, you’ll still owe $2,500 on the loan.
Options for Those Who Owe on a Title Loan After a Total Loss
If you find yourself in this situation, there are a few options available to you. One option is to have gap insurance. Gap insurance is a type of insurance that covers the difference between what you owe on the car and the actual cash value. However, not all insurance policies offer gap insurance, so you’ll need to check with your insurer to see if you have it.
Another option is to refinance the title loan. Refinancing allows you to take out a new loan to pay off the existing loan. This can be a good option if you can get a lower interest rate or a longer repayment period. However, keep in mind that refinancing will also come with fees and interest.
Finally, you could make payments on the remaining balance. This can be a good option if you can afford to make the payments and don’t want to refinance or have gap insurance. However, keep in mind that you’ll still be paying high-interest rates and fees.
What to Do if You Owe More Than Your Car is Worth
If you owe more on your title loan than your car is worth, also known as being “upside down” on your loan, it can be a difficult situation. Unfortunately, your insurance company will only pay you the actual cash value of the car, which may not be enough to cover the full amount of your title loan.
In this case, you will still be responsible for paying off the remaining balance on your title loan. One option is to negotiate with your lender to see if they will accept a lower payoff amount. You can also try to refinance the remaining balance of your title loan with a new lender.
What If You Can’t Afford to Pay Off Your Title Loan?
If you can’t afford to pay off the remaining balance on your title loan, it’s important to act quickly. If you miss payments, your lender may repossess your car. You may also face additional fees and interest charges.
One option is to try and sell your car to pay off the remaining balance on your title loan. If you’re unable to sell your car for the full amount, you may be able to negotiate with your lender to accept a lower payoff amount.
How TFC Title Loans Can Help You Refinance Your Title Loan
If you’re struggling with a title loan after your car has been totaled, TFC Title Loans can help. TFC Title Loans offers title loan refinancing, which allows you to replace your existing title loan with a new loan that has better terms. This can include a lower interest rate, a longer repayment period, or both.
To refinance your title loan with TFC Title Loans, simply fill out the online application form. You’ll need to provide information about your car and your existing title loan. Once approved, TFC Title Loans will pay off your existing loan and give you a new loan with better terms.
You can also read our article, Can I Get a Title Loan if I am on Disability providing solutions for the person on a disability.
A Totaled Car With A Title Loan
If your car is totaled and you still owe on the title loan, it can be a stressful and overwhelming situation. However, there are options available to you. Whether you have gap insurance, refinance the loan, or make payments on the remaining balance, it’s important to take action to avoid defaulting on the loan. And if you’re looking to refinance your title loan, TFC Title Loans can help. With better terms and lower interest rates, TFC Title Loans can help you get back on track and regain control of your finances.
