A car title loan is simply a loan that you can get by offering your car’s title as collateral. For it to work, the car must be yours and it must also be free of any payments. From time to time, people often find themselves in need of some cash. There are many ways of acquiring money when one is desperate, and car title loans are one of those ways. Be that as it may, they may not necessarily be the best thing for everybody. So, if you think this is the best option for you, here’s what you should know for the process to be fruitful.
How Do Car Title Loans Work?
For you to get a car title loan, a lien will be placed on your car’s title and you’ll give up the hard copy of your car’s title for a temporal period (as long as you pay up), an, in turn, you’ll get the loan you needed. When you pay up the loan, you’ll get back your car’s title and the lien will be removed. I don’t think anyone needs to tell you what will happen if you fail to pay up the loan. But if you can’t figure it out; you’ll lose your car if you fail to pay up. Title loans are a double-edged sword; they’ll help you as long as you manage to pay up, and they’ll mess you up if you fail to pay up.
Car Title loans are normally short-term loans. The period for paying up the loan is normally 30 days. Depending on the state you live in, the period can be extended, usually upon request from the borrower, and provided the request is done in advance.
The interest rate for car title loans is normally higher than you would find in other kinds of loans. The main reason behind this is the short period within which the loan is to be paid. It is also for this reason that some borrowers lose their vehicles. As a best practice, it is best to go for a car title loan when you are certain that whatever means you intend to employ to pay up the loan will work and that everything will go as you planned. You have no idea how many people lose their vehicles because of this kind of loan. In fact, the case is so serious that around 25 states in America have banned this kind of loan. So if you intend to take a car title loan, you must first be sure that your state tolerates them. Furthermore, the interest rates given for the car title loans will vary from state to state. Some states have even 0% interest rates if the borrower is well behaved and pays up fast within the period agreed in the contract. Therefore, you may want to check your state’s laws compare a few companies within your state for the best deals.
The procedure of acquiring car title loans is usually a short and painless one. It normally lasts from 15 to 30 minutes. You can get loans amounts as low as $100. For you to be eligible for a title loan, you must be 18years of age and above. This is a standard for all states that tolerate title loans. For the process to be successful, other things that may be required are:
- Some proof of existence – like your government-issued ID, physical mail address, or driver’s license.
- Proof of income
- Car insurance
- A lien-free car title with your legal name
The good thing about the procedure of applying for a car title loan is that your credit score is irrelevant. Most car title loan companies are only interested in the condition and value of the car you are offering as collateral. Of course, the more valuable the car you are offering is the higher the amount of the loan you are likely to receive.
Depending on the state you are in and the terms of the contract for the car title loan, if you feel you won’t be able to pay up the loan within the agreed period in the contract, you can ask for an extension. However, this comes with consequences. You do know that loans become more expensive the longer you to take to pay up. So do yourself a favor and pay up as soon as possible.
Any means for relieving yourself from financial strain is welcome. Nonetheless, you should be careful with car title loans. It has already been indicated earlier that people easily lose their vehicles and even more by applying for car title loans. To be safe:
- Do your homework and ensure that the companies you intend to borrow from are legit and abound by the laws of your state
- Read the contract and any fine print to be sure of what you are signing up for
- Make sure there are no hidden fees that you are not aware off – read the contract
- Read the contract
- Know what your state’s laws say about title loans – this is the best way to avoid being scammed by car title loan companies
And in a nutshell, that’s a car title loan.