Yes, a title loan company can sue you if you default on the loan.
When you take out a title loan, you use your vehicle title as collateral. If you fall behind on payments, the lender can repossess your car and sell it to recoup their losses.
However, if the sale proceeds don’t cover the full loan balance, interest, and fees, the lender may sue you for the deficiency.
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Table of Contents
Grounds for a Lawsuit
There are a few common grounds upon which a title loan company may base a lawsuit:
- Failure to make loan payments as agreed
- Falling behind on payments by a certain number of days
- Failing to pay off the entire loan balance by the due date
- Breaching the loan contract terms (e.g. hiding the vehicle)
What They Can Sue For
In a lawsuit, the title loan company seeks to recover:
- Any outstanding loan balance still owed
- Interest accrued
- Late fees or penalties
- Repossession and sale costs
- Legal fees
They can obtain a deficiency judgment allowing them to garnish your wages, levy your bank account, put liens on your property, and take other steps to force collection.
State Laws Vary
Laws around title loans can differ significantly state-to-state. Some states ban them entirely due to high costs and risks to consumers. Others impose strict regulations like interest rate caps, loan term limits, and additional consumer protections. Know your rights!
Alternatives to Avoid a Lawsuit
To avoid a lawsuit, try to:
- Pay off the loan as quickly as possible
- Renegotiate terms with the lender
- Refinance into a lower rate loan
- Seek help from a credit counseling agency
Communication and working with the lender instead of avoiding them is key. But if sued, consulting an attorney to understand defense options is highly recommended.
In closing, failing to repay a title loan can absolutely result in a lawsuit from the lending company. Understanding the contract terms and your rights in your state is essential when facing the serious consequences these high-risk loans can have if used improperly.
