In times of emergency, when medical expenses, mortgage payments, student tuition’s and home or automobile repairs have to be made urgently, it may be difficult to get quick cash, especially if you have bad credit and have maxed out your credit cards. However, if you have a clear car title, you can use it to get an auto pawn loan, regardless of your credit score.
Auto pawn loans are secured loans issued against auto equity, and are often the quickest way for someone with bad credit to get cash. In order to get approval for car title loans, however, you will have to prove that you own the vehicle used as collateral, and your car loan must be paid off or nearly paid off for you to qualify.
Whereas conventional pawn agreements involve the pawnbroker taking possession of the collateral while the loan gets paid back, lenders will allow you to keep and drive your automobile while you repay a pink slip loan. This makes it harder for the finance company to take possession of the vehicle should you default on your debt.
To recover the collateral, the lender will take action to have the vehicle repossessed and sold. Repossession is the ultimate penalty for not repaying an auto pawn loan. But because it can cost the lender a lot more to repossess and sell the vehicle than the debt you owe them, most will attempt to contact you and collect the payment before it gets that far.
To ensure that they will at least recover the money you owe them, they will only lend you up to 50 percent of the car’s value when you take a title loan. Because the car title used as collateral is usually worth at least twice as much as the outstanding debt, most borrowers will do everything they can to maintain possession of the pink slip.
In order to make repossession easier, some lenders require you to give them a duplicate set of keys. In states like Oregon, however, this is illegal. When the lender has to repossess your vehicle without your keys, they will usually get a set of keys cut using the key code found on the title slip, or hot-wire or tow the vehicle. Some lenders will even go so far as to install a GPS system so they can track down the vehicle if they need to repossess it.
An agent of the lender usually visits your home or place of business to take possession of the vehicle. If the lender managed to sell the repossessed auto for more than you owe them, they should return the excess funds to you. If the car sells for less than you owe the lender, however, you may still be liable to pay the difference under some agreements.
Because lenders have to ensure that they profit from financial transactions such as auto pawn loans, some follow deceptive practices while getting the agreement signed. For instance they will include hidden charges, clauses that require you to rollover the debt after the end of term, and conditions that prevent you from initiating legal action in case your rights are violated.
When you choose an auto pawn loan company, make sure they offer low interest rates and flexible terms to help you repay your debt conveniently, so you can avoid repossession. Read the agreement carefully, especially the fine print. Be informed of your rights as a consumer and understand the terms of your agreement to avoid getting into a debt trap and losing your car.