A title loan is a type of secured loan. This means that if you don’t pay it back, whatever you have secured it against will be taken away. With title loans, the security is your vehicle and you will have to do all you can to keep hold of it. This doesn’t mean that you should never apply for car title loans in Anaheim, however. What is means is that you need to know how to avoid having your vehicle repossessed.
Risk of Repossession
Looking first as the statistics, you may wonder how common it is for people to have their vehicle repossessed after taking out a title loan. The reality is that very few people actually go through a repossession, with the average being between 4% and 8%, depending on geographical location. This means that over 90% of auto title loans are issued and paid for as they should be. Also, the reality is that a car title loan is a less risky secured loan than a home equity loan. Losing a vehicle is bad, but losing your home is a lot worse.
How to Avoid Repossession
There are also a number of things that you can do to minimize the chances of the repo man coming to take your car. These include:
- Only borrow from a reputable lender. Research them through Consumer Affairs, the Better Business Bureau and social media. Most good lenders would rather not repossess your car.
- Only borrow the minimum. A lender may offer you several thousands, but if you only need about $1,000, there is no reason why you should take out as much as that.
- Make your payments on time. It almost goes without saying, but the one sure fire way to avoid repossession is by making your payments on time. Indeed, try to make them ahead of schedule if you can. Do check whether this is a possibility, however.
- Renew your loan. If you have arrived at your payment date and you are unable to pay your loan, find out whether you can renew it. If you can, you will usually only have to pay the interest and the loan principal (plus an extra period of interest) will then be rolled over. While it is best to avoid this, because you could end up in an endless cycle of debt, it is a solution if you really find yourself in a tight spot.
The Bottom Line
The bottom line is that only you know how desperate your financial situation is. A financial adviser will always tell you to not borrow at all. However, sometimes, an emergency arises and there will simply be no option other than to turn to a lender. So long as you are realistic about the potential risks, and you know that you will be able to afford the loan, there is nothing wrong with going ahead and applying for a title loan, particularly since they are now heavily regulated.