Title Loan Refinance

If you’re having trouble paying back a car title loan, one option to consider is a title loan refinance. Done correctly, this can save you money and help you pay your loan off more easily. It’s important to know what you’re getting into, though, and to make sure that you’re choosing correctly. Once you finish this guide, you’ll have a better knowledge of how a title loan refinance works and when you should give it a try.
What’s the Point of Refinancing a Title Loan?
There are a couple common reasons why one would want to refinance a loan, including:

  • To obtain a lower interest rate and pay less on the remainder of their loan.
  • To extend the loan and get a lower monthly payment amount that better fits their budget.

Borrowers often try to obtain better terms, such as a lower interest rate, by refinancing a loan when they’ve improved their credit scores. However, this doesn’t work with a title loan refinance, since title loans are based on the what the borrower’s car is worth and don’t have a credit check involved at all.

The most popular type of refinancing with a title loan could also be considered a loan extension. Since title loans usually have short terms, borrowers may not be able to get their full loan amount repaid on the due date. In this case, they’d refinance the loan to have more time to pay it back.

There is also the possibility of refinancing a title loan so that you can get a lower interest rate. For that, you’d need to find a new lender offering a lower interest rate, get a title loan with them and use that to pay off your previous title loan. There are many lenders offering auto equity title loans Jacksonville, which means you may be able to find a better interest rate if you shop around.

How Can You Refinance a Title Loan?

To refinance a title loan and get a lower interest rate, you can use the method described above. The challenge will be finding a lender that offers you a lower interest rate, since those rates tend to be fairly uniform throughout each state. Your best bet would be visiting another state with lower interest rate limits.

It’s much simpler if you’re refinancing a title loan just to extend it. If that’s what you want to do, here’s how:

  1. Let your lender know by the payment due date that you’d like to refinance the title loan.
  2. Pay any fees and interest on your loan. You can pay some of the loan principal if you want, but this isn’t necessary.

You’ll have a new due date after a term just as long as the old one, and your amount due will be your unpaid loan principal, along with new fees and interest.

Be Careful When Refinancing a Title Loan

When it comes to a title loan refinance, keep in mind that you can’t always do it indefinitely. Many states limit the number of times a title loan borrower can refinance their loan. Once that limit is reached, the borrower needs to pay off any remaining balance.

Even if your state doesn’t have such a limit, you’ll pay a lot in interest and possibly fees if you refinance too many times. The most affordable way to pay back a title loan is to pay the full amount after one term. While the flexible repayment terms of a title loan are one of the benefits, it’s not good to refinance over and over, because you can end up trapped in a cycle of debt.

Unless refinancing is saving you money through a lower interest rate, then it’s best to only use refinancing as a last resort when you don’t have any other options. Go ahead and refinance if you can’t pay everything, but figure out a repayment plan, as well, so that you don’t need to keep refinancing.

Deciding Whether to Refinance

Since title loans typically have 30-day terms, they end quickly enough that refinancing is rarely a good option. The only exception is when you’re short on cash and need to refinance to extend the loan. Otherwise, it’s generally better to focus on getting your loan paid off than to look for other lenders that could offer you a lower interest rate, especially since interest rates rarely vary much.

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