A Title Loan is a form of short-term lending where you pledge your car as security. The interest rates are astronomical just like a payday loan. We often see rates of 125% or even as high as 200-300%.
The following is an explanation of what a Title Loan is, the costs, and good options for you
You give them the title to your car plus a key. That means if you default they can and will repossess your car.
Typically they are short term loans, maybe 6 months.
A short term loan of 6 months with monthly payments looks like this. You borrow $4,000 with interest of $125%. The monthly payment is $929.67. The total payment you repay is $5,578.03 including $1,578.03 interest!
Another way is interest only for 6 months with the requirement to repay the principle at the end of 6 months. This is a balloon payment. The monthly payment is $833 per month and then a final payment of $4,000, all at once.
WHAT IF I DEFAULT?
- The Lender can repossess your car and sell it at auction for dirt cheap prices.
- Because the auction price is so low, you will typically owe a large deficiency. You owed $6,000 and they sell for $2,500; the balance to you is $3,500;
- The interest rate continues to accrue on any balance owe deficiency;
- The Title Lender sues for the balance. By the time they obtain a judgment you might owe $7,000.
- If you are working they can garnish you pay check.
- Also, they can garnish bank accounts and put judgment liens on your house.
WHY BANKRUPTCY MAY BE A GREAT OPTION FOR YOU
If you are in default on a Title Loan and want to keep your car you should consider a Chapter 13.
When you file a Chapter 13:
- You can repay your debts over a period up to 5 years;
- The interest rate on your car loan (Title Loan) is about 5 to 6% instead of 125% or whatever the contract says;
- If the car is worth less than you owe, you can pay just the value and still keep the car;
- You can consolidate all of your debts into a more affordable monthly payment;
- Unsecured debts (like credit cards) are generally repaid ten cents on the dollar or even less;
- For qualified wage earners we will generally file your case with a small down payment; just a bit more than the filing fee.
WHAT IF THE CAR HAS BEEN REPOSSESSED?
If your Chapter 13 is filed before the car is sold it can be recovered. Please see our article on Automobile Repossession - How to get your car back:http://www.robertadamslaw.com/automobile-repossessions-get-back/
WHAT IF THE CAR HAS BEEN SOLD?
If your car has been repossessed and sold you will likely still owe a great deal of money-and the interest is being added every month. You can consider filing a Chapter 7 or a Chapter 13.
Our law firm has helped thousands of good people like you to stop repossessions; get cars back when repossessed and stop all collections.
You can always call us to discuss your problem and discuss your options. Our consultation is free and confidential
Robert J Adams & Associates has helped thousands of good people, just like you, save their home. Take advantage of our free and confidential consultation today.