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Fast Title Lenders > What is a Title Loan Buyout?

What is a Title Loan Buyout?

You may have read about title loan buyouts, but aren’t quite sure what they are and how they work. In this post we’ll cover what a title loan buyout is, when you may need or want one, and some general information on how they work.

Title Loan Buyout Agreement
A title loan buyout is when another lender ‘buys out’ your existing title loan and issues another loan.

The fact is title loans are regulated at the state level, so they are not available in all states. This means title loan buyouts are also not available in all states and may not be permitted in some states that do allow title loans.

What is a Title Loan Buyout?

A title loan buyout is essentially when a lender ‘buys out’ your existing title loan and typically issues you another one. This is similar to a title loan refinance.

The lender will pay your previous lender the total remaining balance on your loan to release you from making any more payments to them. This will also allow your previous lender to release the lien and return the title.

The process of releasing the lien is much faster in states the require the use of the Electronic Lien and Title Program.

Why would I Need or Want a Title Loan Buyout?

There are two main use cases where a title loan buyout may be applied. These are very different scenarios, but the end result is the same: your title loan with your current lender is satisfied and paid completely.

This means the lien is released and the title is returned to either you or the party that own the vehicle when the transaction is complete.

Selling or Trading In a Vehicle

The first use case where a title loan buyout would be needed is if you are selling or trading in your vehicle and that vehicle has a title loan balance. Find out how to sell a car with a title loan.

Trading in a vehicle with a title loan
Buying a new vehicle and trading in your current vehicle with a title loan requires the dealer to buyout your title loan.

In this case of trading in the vehicle, the dealer you chose to purchase your vehicle from will contact your lender and ask for a payoff amount. In many cases, they handle all of the paperwork which makes it easier for you to purchase your new vehicle and trade in the current one with the loan balance.

If you are selling your vehicle, this process is a bit more complicated but can still be done with most lenders. You will need to let your lender know you plan on selling the vehicle, and let the buyer know that you have an existing title loan on the vehicle.

In this case, the buyer of the vehicle will buyout the loan from your lender. You may need to visit the lender with the buyer of the vehicle and sign the title over to them as soon as you receive it from your lender. This does involve a bit of trust, so the buyer will need to be willing to go through this process.

Getting a New Title Loan

The second case where a title loan buyout is used is when another company “buys out” the remaining balance on your current title loan and issues you a new one with them. This is typically done as a part of refinancing a title loan.

In some cases, if you choose to consolidate your debt including credit card balances with a company that issues secured consumer loans, the title loan buyout would result in another loan that may not necessarily be a title loan. Make sure you can refinance the title loan if that is what you decide to do.

Benefits of a Title Loan Buyout

A title loan buyout has several benefits, the main one being a lower cost loan. The reason for moving forward with the buyout is to save money on the total loan cost.

In addition to saving on your current title loan, if you do roll other debt into a consumer loan you may also lower your debt payments across the board. This can help pay off all of your debts faster and help improve your credit score.

Make your Payments On Time

Just like nay other loan, making your payments on time is essential. This is for numerouse reasons, including:

  1. It is a secured loan, so defaulting can mean losing your vehicle.
  2. Late payments are usually accompanied by late fees.
  3. Late payments can increase the interest charges for the entire loan.
  4. If the lender reports to credit bureaus then a late payment may affect your credit score.

When you make your final payment you can get your title back and move one. This is the best part of any title or vehicle secured loan.

Consider a Title Loan Refinance

If you meet the criteria for a title loan buyout then you are likely also a candidate for a title loan refinance. This can lower your monthly payment and total loan cost, ultimately helping to save on your repayment costs. This is especially important if your existing loan is causing difficulty repaying.