Life happens. You take out a title loan to cover an urgent expense, expecting to pay it off quickly, but then things don’t go as planned. If you’re behind on payments, you’re probably wondering: What happens when you default on a title loan?
This blog breaks down what defaulting actually means, the potential consequences, and the steps you can take to avoid losing your vehicle or damaging your credit. We’ll also explain how we at Mr. GOODLoans can help you explore smarter, more manageable title loan solutions, even if you’re already struggling with payments!
How Title Loans Work — and What It Means to Default
A title loan is a type of short-term loan where you use your vehicle as collateral. You borrow money, and the lender holds onto your car’s title until the loan is fully repaid. While it may seem straightforward, it carries serious risks if you fall behind.
What happens when you default on a title loan?. Depending on the lender, even one missed payment can trigger default, giving them the legal right to recover their money, including repossessing your vehicle.
Learn More About the Legal Side
If you live in Alberta, it’s important to know your rights and responsibilities. Read our detailed guide: Understanding the Consequences of Defaulting on an Auto Loan in Alberta.
What Can Happen If You Default on a Title Loan?
Here are the most common consequences:
- Repossession
Your lender has the legal right to repossess your vehicle. Once you default, they may send a tow truck to take your car, sometimes without warning. - Additional Fees
Repossession costs, late fees, and legal charges can quickly add up. These extra costs are added to your balance, making it even harder to catch up. - Credit Damage
Missed payments and repossession will likely show up on your credit report. That damage can last for years and affect your ability to get other loans in the future. - Vehicle Sale
After repossession, your car may be sold to recover the loan amount. You may still be responsible for the difference if it sells for less than what you owe.
What Are Your Options?
If you’re struggling to make payments, don’t wait to take action. Start by contacting your lender. Many are willing to work with borrowers and may offer deferments, payment plans, or even refinancing options to help you stay on track. You can also look into loan relief options, such as financial counselling or debt relief programs, which can provide guidance and support in managing your payments and improving your overall financial situation.
If your current loan feels unmanageable, our team at Mr. GoodLoans can help by refinancing your existing title loan with better terms that work for your budget.
Ready to take control of your finances? Apply for a car title loan with Mr.GOODLoans today and get the support you need with flexible terms and fast approval.
