If you are stuck in a title loan where you are paying hundreds a month but the balance never goes down, you are in a debt trap. Refinancing (or a "buyout") is a way out.
How It Works
You find a new lender (competitor) who pays off your original loan completely. You then start a new loan contract with the new lender.
Why do this?
- Lower Rate: If you initially borrowed from a predatory lender, a competitor might offer half the interest rate to win your business.
- Longer Terms: You might stretch the payments out to lower the monthly burden.
- Customer Service: Some lenders are just easier to deal with.
The Catch
You must qualify for the new loan. If your car value has dropped or you lost your income since the first loan, the new lender might say no.
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Sarah Jenkins
Financial EditorSarah is a financial expert with over 10 years of experience in consumer lending. She is dedicated to transparency in the lending market.
