What happens to your car title loan if you get in an accident


If you happen to have been involved in an accident, and during that time you had auto title loan, it is important to understand the process when dealing with the lender after the accident.

If the damage is not major, the at-fault insurance company will pay the collision shop to fix the vehicle. And you would continue making the payments as agreed with the lender. If the car is totaled, the at-fault insurance pays out the auto title lender, and takes possession of the vehicle. Whatever is left from the payout goes to you.

As part of the settlement process, the insurance company has the lender release the title on the vehicle and you sign documents stating that you have no further claim to your car.

It is important to understand that the settlement is based on the value of the car, and does not pay any liens attached to it.

What if the amount the insurance payed is lower than your loan value?

If you have gap insurance on the car, the insurance will cover the balance. If you do not you are still responsible for the remainder of the loan.

If this is the case, it is best to discuss with the lender directly the situation and renegotiate the terms to avoid hefty default fees and possible judgement. Another option is to refinance the loan with an unsecured lending company to give you breathing time and avoid serious consequences from the title lender.

If you are interested in getting cash for your car, but are worried about a possible accident during the time you have the loan, here are some suggestions:

  1. Speak to several auto title lenders and see which ones list their names on your insurance once the loan is approved. The ones that don’t are better, because then you would be able to keep your insurance settlement, giving you more control.
  2. Consider taking full insurance coverage on your automobile. When getting the auto title loan, the lenders require you to have liability insurance in the case of the accident.  and do not have collision insurance.
  3. Get Gap Insurance, which will pay for any balance that is still owed in the case your car is salvaged.






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