According to statistical data (2018), approximately more than 80% of the vehicles that were purchased in the second quarter of 2018 were financed. Not only that Experian also reports the average amount of car loan that was taken out during the same period was USD$31,400. However, this figure has escalated in 2019 and after, which is evident from the figures that we get to see everyday, which are on the rise.
However, is it a wise move to finance a car with a personal loan? Even if you have a good credit history, you should always check for a few things before taking out a personal loan for a car. This is because personal loans usually attract higher rates of interest and you will be required to use your car or whatever vehicle you are buying as collateral.
So, if you have to keep your car as security with the lenders, it is a much better option to opt for a car title loan or a car loan. There are many different car title loan companies to choose from, so it is best to shop around, to find the best deal possible. By doing so, you will be able to enjoy lower rates of interest as compared to interest rates of personal loans. So, once you have decided that you will be buying a car with a car loan, you must ensure that you do not fall behind on payments.
Failure to pay off car loan will lead to repossession
If you are facing a car title loan default, you have to part with your car as the lending company will take possession of the same. So, how will you avoid repossession if you default on your loan payment? Let us find out what measures you can take for the same.
Ways to avoid repossession of your car
You can take the following steps for the same-
- Negotiate with the lender
Instead of opting for any other procedure, it is best to talk to your creditor first and work out an option. You can ask for some more time so that you can become current with your payment. This you can do by extending the repayment time or breaking down your monthly car loan repayment amount and reducing the amount so that it is easier for you to pay off. By reducing the monthly amount, the burden on you will be less.
- Redeem collateral
This option allows you to take the repossessed car back from the lender once you have paid off the outstanding loan amount. This is a better option as compared to getting your car sold. If you default, in order to recover the loan amount, the creditors usually sell off the collateral. However, if you opt for redemption and inform the creditor accordingly, you stand a chance to get the car back. So, talk to your lender about the option. It should work provided you can assure your creditor that you will repay the loan amount and you also prove it by making the payments on time.
- Loan reinstatement
This is a good option too. And by this it means that you will assure the creditor that you will become current on all your car loan dues, which will also include the penalty charges for default and fees, if any. The arrangement is such that you have to shell out the payment as lump-sum in one go. Also, referred to as “Right to cure the default”, you will be able to reinstate only if you are eligible for the same. This will depend on the laws that prevail in your area and the jurisdiction regulating car loan payments and defaults.
- Sell the car
This must be your last resort. You would not have bought your dream car, if you had to sell it. So, make sure you do not reach such a situation in the first place.
Taking out a loan means you are using someone else’s money, which you have to pay off sooner or later. So, use the money judiciously.
Save for the rainy day and still better if you can build an emergency fund for meeting unexpected financial obligations.