Title Loan Repossession

Repossession is one of the biggest risks of taking out a car title loan. Fortunately, it can often be avoided by borrowing only what you can afford and keeping up with payments.

This guide explains how repossession works, how to prevent it, and what your rights are if it happens.

Key Takeaways

• Repossession happens when a borrower fails to repay a title loan on time.
• Missing payments can hurt your credit and lead to vehicle loss.
• Borrow only what you can repay and budget your monthly payments carefully.
• Many lenders prefer to work with borrowers before repossession occurs.
• State laws protect both borrowers and lenders during the repossession process.

What Is Title Loan Repossession?

Title loan repossession occurs when a lender legally takes possession of a borrower’s vehicle due to missed or unpaid loan payments. Since the vehicle title serves as collateral, the lender has the right to repossess and sell the car to recover the outstanding balance.

Both borrowers and lenders try to avoid repossession, it costs the borrower their vehicle and damages credit, and it costs the lender time and money to recover their funds.

Why and How Title Loan Repossession Happens

Repossession is usually a last resort. Lenders often attempt to contact borrowers and arrange late payments before taking legal action.

Here’s what typically happens:

1. Missed payments: The borrower falls behind on their agreed schedule.
2. Notice of default: Some states require the lender to send a written notice or “right to cure” letter.
3. Repossession: If payments are not made, the lender can take possession of the vehicle (sometimes without advance notice, depending on the state).
4. Auction or resale: The lender may sell the car to recover the debt.
5. Deficiency balance: If the sale price doesn’t cover the loan, the borrower may still owe the difference.

Tip: Repossession stays on your credit report for up to seven years, making it harder to qualify for future loans.

Borrower Rights After Title Loan Repossession

State laws determine how repossession and sale must be handled. You generally have the right to:

• Dispute missing items or improper sale: If laws were violated, you can file a complaint with your state regulator or seek legal advice.
• Receive notice: Many states require the lender to notify you before and after the repossession.
• Retrieve personal belongings: Items inside the vehicle must be returned or made available for pickup.
• Reinstate or redeem: Some states allow borrowers to pay overdue amounts (plus fees) to reclaim the car before auction.
• Be informed about the sale: Lenders must notify you about when and where the vehicle will be sold.

What You Should Know About Title Loan Repossession Laws

Car title loan laws differ from state to state. This includes laws governing repossession. It is always recommended that borrower educate themselves on the laws before applying for a car title loan.

Believe it or not, the laws governing title loan repossession are there to protect both borrowers and lenders. In fact, In California and many other states, lenders can begin the repossession process after a missed payment, but they must follow state-specific notice and collection laws. Borrowers may have limited time to reinstate or redeem their vehicle before it’s sold.

Many lenders will make every attempt to work with borrowers in order to keep the loan current. Some lenders may try to work out a payment plan to bring the loan current. Others may roll the loan over. This usually involved extending the loan for another 30 days.

When lenders roll over a loan, additional interest accrues, along with fees and penalties. Altogether, this increases the total amount due by the borrower.

What Happens If You Don’t Pay Back A Car Title Loan?

While there are many steps a creditor can take before vehicle repossession, it’s important to note the differences between a late payment and a non-payment.

A. Late Payment on a Car Title Loan

If a loan becomes delinquent through late payment, a number of things can occur. It is ultimately up to the lender how they proceed with late payments. Most often, lenders contact a borrower as soon as payment is late to work out a solution.

Even though the borrower will have a late payment recorded on their credit report, it is better than a non-payment. The quicker the loan repayment can get current, the better for all involved.

B. Non-Payment on a Car Title Loan

The situation with car title loans becomes different when the loan goes from being late, to non-payment. This serious situation could end in repossession.

In extreme cases, the lender may demand the entire sum of the loan due immediately. This could cause undue financial hardship for the borrower. However, the lender has every right to call the loan due.

If the borrower cannot bring the loan current, the lender may exercise their right to repossess the vehicle. At this point, the laws in most states support the borrower repossessing the collateral. This is especially true in California.

What to Do If You Can’t Make Payments

• Get help: Contact your state’s consumer protection agency or the CFPB for free resources.
• Call your lender early: Ask about deferment, partial payments, or refinancing options.
• Avoid ignoring notices: Missed communication speeds up repossession timelines.
• Review your contract: Look for sections titled “Default,” “Right to Cure,” or “Repossession Policy.”

Before Getting a Title Loan, Be Sure You Can Pay on Time

Whether the loan is in late payment or non-payment status, or perhaps hone to repossession, these actions will be reported on the borrower’s credit. As a result, your credit score will be negatively impacted. Overall, it’s important to take precautions and research the impact a car title loan can have before obtaining one.