If Your Car is Totaled and You Still Owe on the Title Loan: What to Do

Daniel Joelson

Daniel Joelson

Total Posts: 344

Published Date: July 12, 2023

Daniel Joelson has been in the consumer finance space since 1994, he has helped to develop underwriting manuals for the financial sector. With a vast amount of Knowledge in consumer finance, he has been writing articles for all types of loans. With his knowledge, he is able to help many people to answer different financial problems.

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.

Introduction

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.

Conclusion

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.

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Disclosures

DISCLAIMER: As our policy to make sure you know what we do and what are our limitations, we offer you these disclaimers. We are NOT A LENDER and we do not make short term cash loans or credit decisions. We are a referral service and work only with licensed lenders/brokers.

We may act as the broker for the loan and may not be the direct lender. Loan proceeds are intended primarily for personal, family and household purposes. We do not offer or service student loans.

*Loan amounts by the lenders vary based on your vehicle and your ability to repay the loan.

*Since we do not lend money directly we cannot offer you a solicitation for a loan, except in the state of California. In all other serviced states we WILL match you with a lender based on the information you provide on this website. We will not charge you for this service and our service is not available in all states. States that are serviced by this Web Site may change from time to time and without notice. Personal Unsecured Loans and Auto Title Loans are not available in all states and all areas.

*Auto Title Loan companies typically do not have pre-payment penalties, but we cannot guarantee that every lender meets this standard. Small Business Loans typically do have pre-payment penalties and occasionally will use your car as collateral to secure the loan.

*All lenders are responsible for their own interest rates and payment terms. TFC Title Loans has no control over these rates or payments. Use of the work competitive or reasonable does not mean affordable and borrowers should use their own discretion when working directly with the lender.

*The amount of people who applied for a loan and we helped and those who received a loan is not the same. We cannot guarantee we will find a lender who will fund you.Just because you give us information on this web site, in no way do we guarantee you will be approved for a car title loan or any other type of loan. Not all lenders can provide loan amounts you may see on this web site because loan amounts are limited by state law and/or the lender. Some lenders may require you to use a GPS locator device on your car, active all the time. They may or may not pay for this or charge you for this. This is up to the lender and we have no control over this policy of the lender. Typically larger loans or higher risk loans use a GPS.

*In some circumstances faxing may be required. Use of your cell phone to receive updates is optional.

*Car Title Loans are expensive and you may have other ways to get funding that is less expensive. These types of loans are meant to provide you with short term financing to solve immediate cash needs and should not be considered a long term solution. Residents of some states may not be eligible for a loan. Rejections for loans are not disclosed to our firm and you may want to contact the lender directly.

*Car Title Loan lenders are usually licensed by the State in which you reside. You should consult directly with these regulatory agencies to make sure your lender is licensed and in compliance. These agencies are there to protect you and we advise making sure any lender you receive money from is fully licensed.

*Trading Financial Credit, LLC dba TFC Title Loans, Car Title Loans California, Dineromax. If you are using a screen reader and are having problems using this website, please give us a call at 1-844-242-3543 for immediate assistance.

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