If you've fallen behind on your title loan payments or the interest rate is making it impossible to pay down the balance, you may consider attempting to settle the debt for less than what is owed. While a title loan lender is under no obligation to settle, it may be possible to obtain a settlement on your title loan and ultimately resolve the debt.
Get an estimate of the car's value. One of the most recognized resources for automobile values is Kelly Blue Book. You may also contact your local tax assessor for an estimate of the vehicle's worth.
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Compare the estimated value of the vehicle to the outstanding balance due on the loan. If the value of the vehicle is less than what you owe on the loan, you may be able to leverage this as part of your negotiation strategy.
Stop making payments to the loan if you have not already done so. Lenders are generally unwilling to settle any type of debt if the account is current. The longer an account is delinquent, the more likely a lender may be to accept a settlement. Be aware, however, that letting the account fall delinquent may cause the lender to repossess the vehicle and/or pursue other collection actions against you.
Calculate how much you are willing and able to pay toward settling the debt. You must have cash on hand with which to settle so be realistic in your estimate of how much you can pay. Ideally, you should be offering anywhere from thirty-five to seventy-five percent of the amount owed, while not paying more than what the vehicle is worth.
Draft your settlement proposal letter. Include your name, address, account number, the original loan amount, the interest rate and the current balance due. Include any details that may support the benefits to the lender in accepting a settlement, such as the valuation of the vehicle or details regarding your financial situation. You may also negotiate how the lender will report your account to the credit bureaus and who will retain ownership of the vehicle.
Send your letter via certified mail to the lender. If your offer is accepted, you will need to arrange for payment, either through money order or certified check. If your offer is rejected, you may need to approach the lender with a counteroffer, but again do not offer more than the vehicle is worth or more than you can commit to. If the lender refuses to negotiate, you may need to consider other options for dealing with the outstanding debt and the potential loss of the vehicle.
Keep a paper trail of any and all correspondence between yourself and the lender. Documentation is key to avoiding future collection efforts for the remainder of the debt.
Depending on the terms of your contract, you cannot attempt to sell the car as long as the lender holds a lien on it. Doing so may be construed as fraud and can result in legal action being brought against you.
If your car is repossessed and the lender sells it for less than the value of the loan, you may still be responsible for the remainder of the debt.
Things You'll Need
Copies of all payments made to the lender
A copy of the original contract between you and the lender
An appraisal or estimate of the car's worth
Computer with printer