Refinancing Title Loans

If you have a car title loan Miami that you're having trouble paying back, then one option you may be considering is refinancing the loan. This can be a sound decision when you don't have enough money to pay off the entire title loan on the payment due date. This guide will cover all the ins and outs of refinancing a title loan, from why you would do it to the refinancing methods you have available.

How Refinancing a Title Loan Works

Let's start with the reason someone would want to refinance a title loan. There are two common reasons to refinance a title loan:

• To extend the length of your title loan and avoid a default, which could lead to the repossession of your car.
• To secure a lower interest rate on the remaining balance of your loan, allowing you to pay less than you would have otherwise.

There are also two potential options when it comes to refinancing your vehicle title loan, which are described below.

Refinancing a Title Loan through the Same Lender

The first and most popular option is to refinance your title loan through the same lender where you got it in the first place. This is also sometimes known as extending or renewing the title loan, and it's typically done for the first reason listed above – to prevent your car from being repossessed.

When you initially borrow a title loan, there will be a payment due date at the end of the term. The term is set by your lender, and the standard length is 30 days. Once that 30 days is up and it's time to pay, the amount due will be the loan principal, as well as any fees and interest the lender charged.

The potential problem here is if you don't have enough money to pay all that back. Instead, you can refinance the loan through the same lender, which means you pay everything besides the loan principal, including any interest or fees.

A new term will then start, and at the end of that term, you'll be expected to pay the unpaid loan principal, plus the same amount in interest and fees that you had before. Nothing about the loan's interest rate or fees changes, which is why this method of refinancing a loan is essentially the same thing as an extension.

State laws vary on how many times a borrower can extend their title loan this way. Some states don't limit it at all, whereas others do cap how many extensions you can do. In those states, you need to pay whatever's left on the loan when you hit the legal title loan extension limit.

Refinancing a Title Loan through a Different Lender

Your other option is to refinance your title loan through an entirely new lender. This is typically done for the second reason listed above, as people try this when they want to get a lower interest rate. You can go to one of the many title loan locations Florida, or try a different type of lender.

Here's how refinancing your loan this way would work:

1. You go to the new lender and apply for a loan that's large enough to pay off whatever you owe on your current title loan.
2. Upon approval, you pay off your old car title loan with your new loan.
3. You can then pay off the new loan at the lower interest rate.

Of course, the cheapest way to pay back your title loan is to pay it all off at once and not bother with refinancing. If that isn't an option and you can secure a lower interest rate, then it's good to do that and save yourself some money.

The challenge with this refinancing method is receiving approval on the new loan. If you went with a vehicle title loan the first time around because that's all you could qualify for, then you may need to go that route again. However, if you've been able to improve your credit score in the time since you got the title loan, then you may be able to qualify for a loan that costs you less in interest.

Another benefit with this method is that you can get a long-term loan that you pay back in installments over the course of a year or more. This takes some of the pressure off when compared to the short term of a title loan.

Using Refinancing to Your Advantage

Your best bet with a title loan is to only borrow what you can pay off after the first term. If that's not going to be an option, then you should work on your credit as much as you can by paying all your bills on time and lowering your credit utilization. With any luck, you'll improve your score enough that you can refinance your title loan with something that has a lower interest rate.