In a title loan -- which typically refers to a car title -- you borrow money using your vehicle as collateral. A car title loan is risky for you as the borrower, but it might be your only recourse.
In most cases the title must be clear, meaning you own it outright, although some lenders will issue loans against vehicles with an existing loan as long as the owner has sufficient equity. The lender then adds its name to the title and records the lien with your state's Department of Motor Vehicles. Title loans generally carry high interest rates and associated fees, and you risk losing your car if you default.
Generally, you have three options for paying off a title loan: in person, online or through an automated repayment system. If you plan to pay in person or online, expect to receive reminders from the lender a few days before the due date to confirm that you will honor your obligation. Lenders may push for automated repayments, but they can't force you to agree to them. They must have your written authorization to receive payment this way and must provide disclosures that detail the exact nature of the process and the amount that will be deducted on the assigned date.
The Quicker, the Better
The best tip for paying off a title loan is to do so as quickly as possible. Though you're unlikely to get a refund on the fees and interest due by paying it off before the deadline, you'll at least keep any new charges from being added to the balance.
Look for alternative ways to come up with the money to pay off the loan, such as a personal loan from a bank or family member or by selling some of your possessions at a yard sale, consignment shop or online. The sooner you pay it off, the less risk you face that your car will be repossessed and sold.
If you can't pay the balance by the due date, typically 30 days from when the loan was taken out, you'll likely be able to roll over the loan for another 30 days as long as you can at least pay the interest and fees. If you have a $1,000 title loan that charges $250 per month in interest, you likely will be able to extend it another month, but you'll have to pay the $250 fee and you'll incur another $250 fee for the extension.
Restoring the Title
Make sure that once the loan is paid off, the lender takes care of its obligation to restore your title and remove the lien. If you provided a copy of your car keys to secure the loan, get those back. If the lender installed a GPS device to be able to track the vehicle, ensure it is removed. File the paperwork that confirms the loan has been repaid in case disputes arise later.