There are risks of using a car title for a loan associated with a breach of a loan clause, for instance, failing to make the repayments of the loan in the required time frames. Nonetheless, there are unique risks associated with car title loans and one such risk is not making timely loan payments: foreclosure of the automobile used as collateral.
Not this very drawback would prevent car buyers from considering these loans. According to a study, about 3.7% of clients sought auto title loans.
This is one of the reasons why you must understand the ramifications of borrowing against your vehicle even as the thought of seeking a title loan crosses your mind.
Auto Title Loans: What Kind of Animal Is That?
In what is commonly known as a “pink slip loan”, for a car title loan, you will hand over the title to your vehicle and take a cash amount equaling 25-50% of the estimated value of your car.
Title loans assist especially those borrowers experiencing monetary emergencies and who have had trouble repaying any other debts in the past. Most of these lending companies have very low credit policies - some do not check credit at all. In your case, if your application is approved, you should not wait long - your cash may be in hand within 24 hours, often faster. It is usually rather easy.
Terms of the loan: These are usually short-term loans with a repayment period of 15 to 30 days.
Costs of Obtaining: The Interest rates on these lending products are expensive. Some states do not have this limitation, while others limit the amount of interest that can be charged by the lenders.
Availability: At-a-Payday staggered siza no auto title laws permit such loans or their users in several states. Usually, you will have to fully own your car to obtain the loan if you reside in one of the 25 states that permit car title loans.
Cognizance: These kinds of loans are available in 12 states, however, they are subject to restrictions. Less often, some lenders will extend such loans even when a client has an outstanding non-automobile loan.
How May I Obtain An Auto Title Loan?
There are two types of loans available for auto title loans. A few loans fall under this single payment type whereby the borrower is expected to repay the principal loan amount and offer a penalty interest within a short period that lasts roughly a month. However, for some lenders, the repayment duration can be 3 months or 6 months depending on the installment loan.
However, despite the product name having the term “car”, these loans can also extend to boats, motorcycles, and other leisure vehicles.
You can choose to apply online or apply in person, but the car needs to be shown to the lender physically. When applying for a car title loan, one must be prepared to provide a clear title, insurance, and photo identification to the lender.
Problems Associated with Title Loans
As stated by experts one may be assured by the fact that it is easy to secure a title loan, and then realize that this convenient alternative has its costs and risks. There is a valuable loan that you default on and so it’s paid out more loans and more fees rolled into another cycle so if you can’t pay it when it’s due, there’s always another loan in the system.
That has to be given to those who, at best, already sleep with bread in their mouths trying to squeeze more so that all the debts are paid off. That embodies the concept perfectly the debt cycle.
Personal Loans For Title Loan Recipients
Even with the heavy costs associated with it, some customers do not think they can be accepted by another true lender. As one finds out in a survey, these borrowers, 48% of them, for car titles, pawns, and payday loans did not see the need to look for additional credit.
To search for cheaper and better places to borrow than those already offered, seek out regular banks and credit unions. Or, in case you need funds and there is a credit card at hand, one can draw cash from the card.
If you do not have a bank account have a low credit score or have been unable to manage your finances very well in the past, you should still try exploring all creditors to readopt clean credit status.
Take Out a Personal Loan
Even though getting a personal loan with bad credit can be challenging, you still have choices. Some lenders, most of whom can be found on the internet score. Attempting to clarify your situation to the banker is also an option if you are under the roof of a credit union.
Depending on how well your banking history has been or how good the relationship is, credit unions are willing to loan you money. It is also possible to call a friend to improve the chances of getting a loan approval.
In Summary
Auto title loans are an easy way to get quick cash, but typically, the cost does not balance out against the risk, and you can end up in an even worse spot than when you began taking the loan. Before settling on a car title loan, think of less expensive options that can be used like a credit card, personal loan, or payday alternative loan.
Read the fine print, though. If you do not have any other choice and you are forced to get that car title loan, remember that title lenders are federally mandated by law to be truthful and transparent about the overall cost of the loan, as well as give you written loan terms before you sign off on a loan. If you think they are concealing some information, seek another alternative for your loan.