Car Title Loans: Can You Default On Payments?Fast Action Finance SEO
Car title loans are basically a type of secured cash advance. If you need cash for an emergency expense, you can always approach a lender and provide a car title to get auto title loans in Mississauga. This type of loan does not require you to have a perfect credit score as long as you can prove ownership of a car. The lender will ask you to provide a car title and in return give a loan which you are required to pay back plus interest after a specified time.
The borrower is allowed to continue using his or her car as they service the loan. In the event that you are unable to repay your title loan on time, the lender is entitled to repossess your car. There are few cases of people who default on their car title loans and this usually comes with dire consequences. Some of the consequences of defaulting on a car title loan include:
Defaulting on car title payments adversely affects your credit score. Lenders give an allowance where borrowers can roll over their principal to the next month and pay the interest only if they are unable to raise the whole amount due in a month’s time. You should do this only when you are sure you cannot pay in time. However, when you roll over your payment, this reflects on your credit history and lowers your credit score.
It gets worse when you default on your payment. In some states, late loan payments can reflect on your credit report up to two years. When one defaults, this report can reflect even up to fifteen years. Lenders are very wary of defaulters and this can lower your chances of getting loans including mortgages in future.
Repossession of asset
As mentioned earlier, when you default on your car title loan the next thing that follows is that the lender will be forced to repossess your vehicle. Most lenders don’t give a notice on when they will repossess the car, so they can show up when you least expect it. This whole process can be quite embarrassing especially when they take your car while at work. This can create additional stress to you and your family.
The best way to avoid a default is by properly planning your finances. You should prioritize debt payments as you would other expenses. Make sure that you include loan payments in your monthly budgets and ensure that you follow through. Try as much to cut back on your expenses to ensure that you save some money every month to go to your emergency savings. This way if you have a lot of debts lined up to pay and you suddenly lose a source of income, you can comfortably make your monthly payments as you get back to your feet. Only apply for title loans in cases of emergency and you should never use this cash on things that you can easily live without. Financial experts advise people to only apply for loans if they have already cleared their outstanding debts.
Opting for voluntary repossession
Sometimes it happens that due to unforeseen circumstances, you are unable to pay off your title loan. This can happen to anyone. If you happen to find yourself in such a situation, it is best to approach your lender and explain the predicament. You can willingly give up your car to the lender for repossession clearing you from further obligation towards the loan. Doing this not only relieves you of stress but it also allows you to keep the repossession from reflecting on your credit history.