What Happens To A Title Loan When A Car Is Totaled?Fast Action Finance SEO
An auto title loan is the quickest way of getting cash when you really need it. There is no complex process involved when applying for the loan, and your credit score often doesn’t come into play here. However, you have to provide your car title as collateral for the loan. That is all that is required to get cash in the shortest time possible. But what happens to the title loan when your car is completely wrecked? Does it mean you will pay more? Does it mean you will not pay? Well, here are the answers to all the questions that you may have had in mind in the past.
Loan repayment is still required
First, you will still be required to pay the loan you borrow with your car as collateral. Typically, most lenders require loan applicants to have liability insurance. Car insurance policies, that see to it that you are duly compensated when your car is totaled, are meant to protect both the lenders and borrowers. Therefore, if your car is involved in a serious accident that leaves it totaled (meaning it is beyond repair), the liability insurance company will settle the title loan for you. Unfortunately, if a borrower does not have liability insurance for his automobile, he will still be obligated to repay the loan.
Lapse in insurance coverage
There are also cases where there may have been a lapse in the insurance coverage just right about the time your car is declared totaled. So what now? In such a particular case, borrowers will be liable for loan repayment. It is usually advisable for borrowers to negotiate with lenders by fulling explaining their situation. There is no denying that car accidents are all too common. However, totaling just happens to be relatively rare. Negotiating is one of the ways of trying to get lenders to accommodate you with a new repayment plan.
Is there any collateral left?
Well, the minute your car is declared a total wreck, there will be no collateral for the auto title loan. As a consequence, lenders are more likely to change your title loan into a personalized loan. A personalized loan will definitely come with different loan terms as compared to the auto title loan. This happens to be the case especially if a borrower is unable to provide any collateral on the title loan.
What if you use another car?
If you wish to use another car as collateral, lenders will simply add the balance to your new loan. The new refinancing plan offered by the lender will be capped such that it does not exceed the value of the car you wish to use as collateral. The good news is that the title loan will not be changed and the last thing you will worry about is new loan terms that may not likely favor you. So if you can find a collateral, use it to ensure your title loan is not affected.
All in all, as a borrower, it is recommendable to act fast when your car is totaled. You should get in touch with lenders and explain to them what exactly happened. Most lenders will give you up to three months to catch up with payment. In cases where the borrower has suffered injury due to the accident, it may be difficult to keep up with payments because of medical bills and other expenses that may be related to the incidence. In conclusion, if your car is totaled, you lose collateral. When you lose collateral, lenders may be forced to change your title loan into a personalized loan, which comes with different terms which may not be in your favor.