As with other loans, auto title loans have a risk of repossession of your vehicle. If the loan is not repaid by the borrower, the vehicle becomes subject to repossession.Because the vehicle is used as collateral.
Those who wish to take out car title loans can take steps to avoid repossession. This way, they can still borrow money without losing their vehicle. Let’s take a closer look at the risk of repossession and how you can avoid it when taking out car title loans.
Risk of Repossession
First, let’s consider the risk of repossession in the vehicle loan industry. Do many people end up losing their vehicles?
Most people do not go through repossession when taking out a car title loan. Studies show that vehicles are repossessed 4-8% of the time. This means that over 90% of car title loans are issued without the vehicle being repossessed.
Also, many people forget to consider that car title loans are less risky than other sources of loans – such as home equity loans. Just think about it, would you rather risk your home or your vehicle?
How to Avoid Repossession
Having to look over your shoulder for a reposition is not an appropriate situation. Therefore, you may wish to take the necessary steps to avoid this minor risk. These include the following:
Work With a Trustworthy Lender
Research some lenders on the Internet. Check them out with the Better Business Bureau and through your own research. Doing this will help to ensure that you are dealing with a company who will rather offer you a reasonable car title loan than repossess your vehicle.
Take Out Only What You Need
Just because you qualify for $10,000 does not mean that you should take it all. For example, if you need some cash to pay for a $4,000 medical bill, take out $4,000 that is sufficient to pay the bill.
Pay Installmentally and On Time
Ensure to make your payments on time. Doing so will keep your interest rates down and the lender won’t have any reason to repossess your vehicle.
Try to Pay Ahead of Schedule
It’s very important to pay your loan installments on time. But, if you’re in the position to do so, you can start paying ahead of schedule. This will assist you to pay it off quickly and once it is paid off, there will be no chance of repossession.
Renew Your Loan
If something comes up and you can’t make your monthly payments consider renewing your loan. You will have to pay additional interest. Therefore, this should only be considered if you have an unforeseen problem making payments. Also, do not take out a car title loan knowing that you can’t afford it.
Taking out a car title loan is a personal financial decision. The risk of repossession is low and can be avoided with some simple measures. All debt involves some risk, but savvy consumers can make the best use of it.