A title loan is a short-term and high-interest loan requiring you to use your car as collateral. If you need better credit and a loan, look for areas that accept your low credit score or spare credit history.
Title loan lenders normally don’t check your credit score history, but there are other hurdles you may face. If you’re looking for a title loan, here’s what you must know before getting one.
What is a title loan?
A title loan is a safe loan where borrowers use their vehicle as collateral. Since your car secures loan repayment, the lender can repossess your vehicle if you don’t repay the loan on time.
Title loans are generally short-term, high-interest loans with certain requirements, meaning that you may still qualify if you have poor credit. Many times, credit scores and histories had yet to consider at all.
How do title loans work?
You can utilize it for a title loan through a lender if you own your vehicle outright and have a lien-free car title. During your application, you must show your lender your car, proof of license (your car title), and your license.
You’ll hand over your car title in exchange for a loan if approved. While the lender determines your loan terms, title loans typically have 30-day terms similar to payday loans. It means you will make a single payment at the end of your loan term.
You will have to pay the amount borrowed plus any interest and fees. Most lenders demand a fee of 25% of the loan amount, translating to an annual percentage rate (APR) of at least 300%.
It is where title loans become a headache. If you don’t refund your loan on time, you could lose your car, which acts as collateral. So if you take a title loan, pay it on time without risking losing your property.
When should you get a loan?
According to the Consumer Financial Protection Bureau (CFPB), 20% of car title loan borrowers have their car repossessed when they cannot repay their loan in full. Car title loan lenders derive much of their business from borrowers who constantly take out new loans to cover their old ones.
Over half of auto title loans become long-term loans, and more than four-fifths of them had repossessed because borrowers cannot pay them off in full in one payment.
Because of this, you should look at alternative financing methods before taking out a title loan. Alternative payday loans from credit unions, private loans from online lenders, credit cards, and borrowing money from family and friends are better options than risking losing your vehicle.
What do you need to do to get a title loan?
Many ask, “What do we need to get a title loan?” The answer is simple. You must be a min of 18 years of age or more senior and be able to demonstrate this by showing a government-issued ID.
You should also have a lien-free car title in your name and a car with some regular source of income. The latter can be anything from pension or disability to regular salary or unemployment benefits.
If you meet all the needs and have what you need for a title loan, you can apply in person at a location near you or online. The advantage of applying at one of our branches is that they will inspect your car immediately. Once the vehicle’s value is determined, the loan specialist can make an offer.
Pros and cons of title loans
Before taking out a title loan, review the pros and cons. It will assist you in deciding if this is the correct move for you.
Pros of a title loan
No Credit Checks:
Most title loans do not require a credit check. It is good news if you need to take out a cash loan, have exhausted every other available option, and need more credit to qualify for a traditional loan.
Quick approval and access to funds:
Lenders only take a rare second to review your application and vehicle because there is no credit check. Once approved, you can receive the funds immediately or within two days.
Cons of a title loan
Potential Debt Trap:
The CFPB notes that more than half of auto title loans are a debt burden on borrowers. It means borrowers continue to take out new loans to repay old ones, leaving them in a cycle of debt they can’t get out of. It is harmful and dangerous, leaving you in debt for months after initially taking out the loan.
High interest and fees:
APR for title loans can be as high as 300 percent due to finance charges, interest rates, and other fees. These charges can further strain your financial obligations.
Short repayment terms:
Title loans usually require repayment within 15 to 30 days. Compare this to conventional loans, which typically have repayment conditions of six months to three years, depending on how much you borrow. A 15- to 30-day repayment period only sometimes gives you enough time to find the funds to repay your loan, plus a high APR.
You Can Lose Assets:
Car title loans can put you in a dire position: Continue to rack up a huge debt load or submit your car. Remain on top of your payments to avoid the potential burdens that title loans can bring.
Faqs
Companies that offer title loans are finance companies that must register with the California Department of Business Oversight. Make sure the company is registered here. Unlisted companies cannot offer car title loans. Each location must enter if the car title lender has multiple locations.
A title loan is when you pledge your car title to a pawnbroker for a loan. If you fail to reimburse the loan and interest on time, the pawnbroker can immediately repossess your car. The duration of the Title Pawn Loan is 30 days. The loan can extend in 30-day increments if you and the pawnbroker agree.
But like any loan, it must repay. You usually have fifteen to 30 days to repay the loan lead plus any interest fees. If you forget to do so, the title loan enterprise can repossess and sell your car to cover the losses.
Your loan limit ranges from 25% to 50% of the car’s total value, and the lender will look at defining the value of your car. Some loans are for less than $100, while others are for $10,000 or more.