When taking out a loan, the last thing people think of is defaulting. Unfortunately, though, defaulting on a loan is pretty common, especially if you’re bad at managing money or setting a budget. But what exactly does it mean to default, and what happens when you default on a title loan? Let’s take a look and answer these questions one by one.
What Does It Mean To Default On A Car Title Loan?
The very basic definition of loan defaulting is when you fail to pay back the borrowed money on time. It signifies the breaking of contractual terms, which means the lender can deal with the defaulter however they want. In terms of a title loan default, though, the lender is viable to take possession of your car.
If there is one thing you need to keep in mind, it’s that every state has a different way of dealing with loan defaulting. The laws vary state by state, and in Texas, especially, the lenders have full control over your vehicle the minute you cannot pay them back.
What Happens If You Default on a Title Loan?
While repossession may seem to be the only end to this problem, there are actually two different solutions. If you take out a title loan but cannot make the payment by the agreed-upon date, you can let your lender know. Depending on the situation, they might come up with an alternative.
Loan defaulting is usually frowned upon as it can have a severely negative impact on your chances of getting a job or building your credit score. Nevertheless, here are two common outcomes of a title loan default.
- Additional Fees & Penalties
In some cases, the lender might skip the repossession and instead elongate your term. But that typically comes with an additional fee or penalty that can put even more burden on you.
If the lender chooses to repossess your car, they might auction it off to gather enough money to cover the loaned charges.
What To Do If Your Car Gets Repossessed?
In the case that your car gets repossessed, you have the option of reclaiming it before it is sold off. This can be done by paying back the loan in full amount. However, if that is not possible, your car will most probably get auctioned.
If the lender sells the car and makes extra cash off of it, they are entitled to pay you back. For instance, if your loan costs $3000, including the interest and penalty fee, but the lender made $6000 off the sale, they will have to pay you the extra $3000 back. On the other hand, if the car was sold for only $2000, you will still be held accountable and asked to pay back the remaining $1000.
Looking For Safe & Secure Title Loans? We’ve Got You Covered!
Defaulting on a title loan can be pretty scary, especially with the looming threat of you losing your car. Nonetheless, if you would like to take out a safe and reliable title loan in Texas, contact Advantage Finance LLC at (281) 410-5337. You can also visit us in Houston at 616 Fm 1960 West #680 Houston, TX 77090, near the 45 and FM 1960 in Chase Bank Building.