How to get out of a title loan without losing your car

By Nooreen B Reviewed by Izzy M Edited by Sarah R
Modified on February 26, 2024
how to get out of a title loan without losing your car

A title loan, also called an auto title loan or car title loan, uses the equity of a vehicle to make funding available. The loan amount will be based on your car’s value and income. Car title loans can be convenient for bad credit borrowers. However, they come with extremely high-interest rates, and fees. Not to mention, most lenders require ownership of your vehicle for a title loan. And so, when you sign up for a loan, your lender will add a lien to your car’s title. This means that the lender has legal ownership of the vehicle until the loan is paid back in full. 

If, for whatever reason, you find yourself in that situation where you need to get out of a title loan, you may be wondering how you can proceed without losing your car. Below is more information on how you can do so!  

Different Ways of Getting Out of an Auto Title Loan Without Losing Your Car 

Because of the car’s role with a title loan, there aren’t many ways to get out of the loan without paying it off first. Especially if you don’t want to risk losing your vehicle. Here are some of the different solutions you can consider: 

Pay off the Loan Out of Pocket if Possible 

One of the most obvious ways of getting out of your title loan is going to be by paying off the loan. Some lenders don’t have any penalties for early repayment. And so, if you have the funds, talk to your lender to figure out whether it is the best option for you. 

Even if you have missed several payments and your car is close to being sold, your lender may allow you to get your vehicle back if you make enough payments. 

If you only have a few payments left and can afford them, you may want to move forward with early repayment, even with the penalties, if it means getting out of the loan early. 

Here are some examples of things you can do to supplement your income quickly so you can pay off a title loan: 

  • Get a Side Job — A side job can be a great way to get cash when you need it. There are all kinds of things out there that will work alongside a full-time job.
  • Monetize a Skill or a Hobby — A wide variety of skills or hobbies can be used to make money. If that is an option for you, find a way to get started. You can check out freelance job posts, local ads, ask friends or family, or apply with companies that focus on staffing.   
  • Sell Your Personal Property — Most people have a few things of value that they can get rid of. Selling them can be a quick solution to an emergency if you need some extra money to pay back the title loan. 

Work Out a Different Repayment Plan With Your Car Title Loan Lender

Another option you should consider is talking to your current car title loan company. Although this may not help you escape a car title loan, it can help you keep your car. In most cases, a legitimate lender will try and work with their borrowers to get repayment on track. If you can get a more manageable repayment option, it can mean paying off your loan and keeping your vehicle.

Choose Another Loan Type To Pay off the Car Title Loan

Another option to consider is to look at a different kind of lending altogether, one of which doesn’t involve your vehicle to pay off your existing loan. Here are some alternative loan options to consider for title loan payoff:

A Personal Loan

A personal loan is an unsecured loan option that is repaid in monthly installments. The interest rates and repayment terms will vary depending on your financial situation and the lender you choose to work with. Although good credit is needed when you apply for a personal loan through a bank or credit union, some lenders make personal loans available for people with bad credit scores. These options should be your first choice as they don’t require collateral, may offer lower interest rates, and can come with fewer fees. 

Payday Loans

Payday loans have extremely short loan terms and are available for a few hundred dollars. You can apply for a payday loan with bad credit, and they may seem like an ideal solution for fast cash. Still, just like title loans, they can come with high-interest charges and extremely high fees. Both of these factors can lead to a cycle of debt. 

Credit Cards

Credit cards are a form of revolving credit that you can borrow from multiple times until you reach your credit limit. To get good interest rates on a credit card, you will need to have a good credit score. And so, they may not be accessible to everyone. 

A Cash Advance Loan or a Credit Card Cash Advance

Cash advances may be available as a loan or as a credit card cash advance. Although these loans may seem like a convenient option, you may not get a large loan amount, and there can be many fees and a high-interest rate. 

Home Equity Loans

If you are a homeowner, you could consider a Home equity loan to pay off your title loan. Home equity loans use the value of your home to make funding available. These loans can come in large amounts, and you won’t need to have good credit. However, if you cannot pay back your loan, your home can be at risk! 

Consider Another Car Title Loan Lender

Title loans are usually not the best loan option, even for bad credit borrowers. You should avoid car title loans if possible. However, applying for another title loan is an option. And if you want to get out of your existing car title loan with new loan terms and a different lender, you can. 

In this case, a car title loan lender may be open to providing enough funding to pay off the existing loan. Then instead of the previous lender being on the title, the new lender will take their place. A new lender can mean more manageable terms and lower interest rates so you can pay off your loan quickly. Before you choose a lender, make sure to do some research to avoid shady title loan businesses. 

File for Bankruptcy if You Cannot Pay Back Your Title Loan or Other Debt

Another thing you can consider if you are struggling with every aspect of your finances and debt is to file for bankruptcy. Most individuals file for Chapter 7 bankruptcy. Although bankruptcy won’t get rid of student loans, child support obligations, alimony, and tax debt, it will bring relief for other kinds of debts like title loans. You can file bankruptcy for free through several government sites whose tool helps you file. Or you can hire an attorney that helps you file. However, keep in mind that filing for bankruptcy should always be a last resort option.

Why Does a Lender Own a Vehicle With a Car Title Loan?

You may be wondering why a car title loan lender gets ownership of the vehicle in the first place. This occurs because, with car title loans, the security for the lender comes from the access to the borrower’s vehicle in case the loan cannot be paid back. By adding a lien to the title, the title loan lender legally owns the car and can repossess it if necessary. 

Title Loans and Repossession

If you cannot pay your loan through any of the solutions above, your lender will have the right to the vehicle. The title loan company must give you notice during every step; required notices will differ from state to state. If your car is being repossessed, the best thing you can do is play by the rules. When you sign up for car title loans, you agree to these terms, and if the debt obligation cannot be made, the lender will have legal rights to repossess and sell your car. 

Because of this risk, many people avoid secured loan options like car title loans in the first place. And even if you have an emergency need for cash, these loans should be a last resort. Title loan interest rates and fees make it difficult to get out of a cycle of debt

To find out more about a title loan or salvage title loan, check out the rest of the CreditNinja Dojo!

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