Finding a way out of car title loan debt can be perplexing for many. Car and auto title loans are given out to consumers without intensive applications. They are easily attainable for most who apply because the lender uses the consumer’s car or truck as collateral. There are typically no credit checks which means those looking to borrow who have bad, low or no credit at all have the same chance of getting a loan with a car title lender as with any other type of loan.
The problem for some people who opt to take out these short-term loans is that they are expected to paid back quickly. That may be easier said than done for some borrowers. Car title loans range from $500-$5000 depending on how much a person’s car is worth. Lender’s usually give anywhere from 1-3 months for the loan to be paid off. This can create a problem with debt for some people when they aren’t able to pay it off in time. How do you find the right debt solution when you are faced with this type of situation?
*Consolidation- Take out a consolidation loan that will allow you to pay off your car title loan and have the option to combine your balance with other debt you may have. You will avoid high interest rates and fees charged by car title loan lenders and possibly reduce your monthly payment in an attempt to get your debt paid off. Consolidation loans don’t work for everyone, though, being that you still have to be approved once you apply. If your credit score doesn’t permit, this may not be an option for you. You may also be charged a monthly fee on a consolidation loan and because it is unsecured, the intertest rate may be really high.
*Credit Counseling- In this type of situation the credit counseling company will look at your budget and income and help you restructure your payments in order to pay down your debt faster. They will work with your creditors to set up a payment structure. It’s not a guarantee that your car title loan lender will cooperate and work with the counselor, though. Taking care of your debt this way can benefit you in the long run by having a goal to pay off your bills but won’t help your credit. Creditors will still report that you are making payments late.
*Debt Settlement- You or a professional negotiator can approach your lender and offer a a payoff amount that is lower than what you owe. Most financial experts say to start off by offering 25% of what you actually owe and then working from there. Debt settlement can save you a great deal of money but unless you have the cash to pay up, this may not be an option for you.
*Bankruptcy- This should be a last resort and is something that should be avoided if possible. You will lose your credit standing and the BK stays on your credit report for seven years. It will get the car title loan collector of your back but may create problems for you as far as having future purchasing power.
Finding a solution to paying off your debt with a car title loan may be a grueling process. Perhaps the best road to take is working with your lender directly to find a payment plan that works for you and your budget. Make sure you communicate with your lender about your inability to make your payments or else you will risk having your car repossessed.