About 1.7 million Americans take out title loans every year.1 Do you have a title loan you are trying to get out of? Thankfully, there are plenty of companies that pay off title loans.
Learn more about title loans and how you can potentially get out of them with a title loan buyout!
What Are Auto Title Loans?
A title loan is a secured loan that usually comes with a very high interest rate and a short-sighted payment schedule.
Car title loan lenders also require that the borrower’s vehicle have enough equity so they can use it as collateral. Some title loan lenders do not allow borrowers to drive the vehicle while making loan payments. But it’s possible to find title loans that don’t require the car.
Upon loan approval, car title loan lenders will sign onto the borrower’s vehicle title as a lienholder. A lienholder receives partial ownership over the car. Since the lender is a lienholder, they have the right to repossess a borrower’s vehicle if that borrower defaults or fails to pay back their title loan. However, according to a 2012 study, less than 10% of vehicles involved in title loans are repossessed.2
Alternative Names for Title Loans
Title loans go by a few different names in the lending industry, but know that they all refer to the same type of funding.
Some different names for a title loan are:
- Car title loan
- Auto title loans
- Vehicle title loan
- Car equity loan
- Pink slip loan
Pros and Cons of Title Loans
A car title loan is convenient, but there are pros and cons to consider. Learn more about title loans below:
| Aspect | Pros | Cons |
| Accessibility | Available to people with poor or no credit. | High risk of losing your vehicle if you default. |
| Speed | Quick approval and disbursement of funds. | High-interest rates make it costly. |
| Collateral | Your vehicle serves as collateral, so there is no need for a co-signer. | Hidden fees like balloon payments and prepayment penalties. |
| Flexibility | Some lenders may offer flexible repayment options. | Short repayment terms can lead to unaffordable payments. |
| Availability | Many lenders offer title loans, so they are easy to find. | Risk of dealing with unscrupulous or predatory lenders. |
How Does a Title Loan Buyout Work?
A title loan buyout is when a lender takes your existing title loan and rolls it over into a new loan deal. When borrowers get a title loan to cover large expenses and need more than just a few weeks to repay the loan, they often find their balance, and monthly payments can get out of control quickly.
Unaffordable loans can result in late or missed payments or, even worse, defaulting on their loan. Refinance a title loan instead of facing default on your current title loan and other financial inconveniences.
How To Get a Title Loan Buy Out
Applying for a title loan buyout is quite similar to applying for a regular loan; here is how the title loan refinancing process works.
First, if you are working with an online lender, go to their website and fill out a loan application. Make sure you request a loan amount to cover the remaining balance of your current title loan.
From there, your new lender will contact you to tell you your loan approval status. You will receive your money after you send in your documentation and sign your contract. Then, use your funds to pay off your title loan and be done with it forever!
What Companies Pay off Car Title Loans?
There are a few different loan companies that are usually willing to buy out title loans. Depending on factors like your credit score, general income, and financial habits, you may have an easier time finding loan approval with a particular type of lender over others. Below are some lenders you may consider for a title loan buyout.
- Banks — Banks usually only accept applicants with good credit and a clean credit history. If you have a bad credit score or have dealt with bankruptcy, you may have trouble getting loan approval from a bank.
- Credit Unions — A credit union is a financial institution owned by a group of debtors. Who is a debtor and how does it affect you? Well, debtors are borrowers just like yourself, which means you could get special perks and benefits through a credit union. Many credit unions are often small, low-scale financial institutions, so they may not offer online or mobile banking options.
- Private Lenders — A private lender, also known as a direct lender, may also be able to help pay off your existing title loans. A direct lender may offer loan products such as installment loans, personal loans, payday loans, or other bad credit loans. The requirements for eligibility can be flexible with private lenders.
Benefits of an Auto Title Loan Buyout
A title loan buyout can be a great way to organize your finances and get out of spiraling debt. Check out the potential benefits you can enjoy with a car title loan refinance.
Better Interest Rates
You may be able to get a lower interest rate with a title loan buyout. Depending on financial factors like your credit history and income, lenders may be able to grant you a more favorable annual percentage rate. Getting better rates will help you save money overall as you pay off your new loan balance.
Affordable Payment Plan
Title loans often come with extremely brief loan terms. If the payment plan your current lender set you up with just isn’t working for you anymore, a title loan buyout may be able to help you extend your terms. Spaced-out installments will result in lower monthly payments, making paying off your new loan a breeze!
More Money
When you refinance your current loan, you may be able to get extra money! When you apply for your title loan buyout, you can request funds to cover your existing loan as well as additional funding if needed. Keep in mind that how much cash you are able to get with a loan ultimately depends on factors like credit, income, and payment history.
Better Service
When working with a subpar lender, dealing with a difficult financial situation can be even more stressful. Getting a car title loan refinance allows you to work with a new lender who will thoroughly communicate with you and meet your financial needs.
Potential Increase in Credit Score
A title loan buyout may also be able to help you boost your credit score. As you make timely installments and eventually pay off your loan, credit bureaus will receive this positive data and include it on your credit report. When you do your next credit check after paying off your refinanced loan, you may see an increase in your score!
FAQs on Title Loans
If you cannot make a monthly payment, it’s essential to contact your title loan company immediately. They might offer a grace period or discuss potential solutions. However, consistently missing payments can lead to repossession of your vehicle.
Most title loan lenders allow early repayments. However, it’s crucial to check if the title loan lender will charge a prepayment penalty before you change the repayment schedule.
Yes, besides title loan buyouts, you might consider title loan refinancing with another title loan lender who offers better loan terms. Alternatively, seeking financial counseling can provide guidance on managing debts.
A title pawn loan requires you to physically hand over your vehicle to the lender in exchange for the loan. You won’t get your vehicle back until you repay the loan. In contrast, with a regular car title loan, you can continue using your vehicle while repaying the loan.
Some title loan lenders might offer loans even if you’re still paying for your car. However, the existing loan can affect the amount you’re eligible to borrow.
When thinking about title loan refinancing, consider factors like lower interest rates, more manageable monthly payments, and favorable loan terms. Always read the fine print and ensure you understand any fees or penalties associated with the new loan.
What CreditNinja Wants You To Know About Title Loans
Title loans are high-cost, short-term small loans that can cause a lot of financial issues for borrowers. If you want financial freedom from an auto title loan, consider applying for a fast personal loan.
CreditNinja offers personal installment loans with flexible repayment terms. Unlike other lenders, we look at more than just your FICO score to determine approval. Fill out the short online application form today to see if you qualify for a versatile personal loan to get back on your feet.
And if you want access to informational articles about personal finance questions, such as “How to liquidate your loan,” check out our free online blog!
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