Have you thought about getting a car title loan but aren’t sure about the benefits or disadvantages of the loan? Are you tired of scouring the internet for answers just to be stuck at a dead end?
Car title loans are excellent solutions for those who need quick access to cash but can’t receive a personal loan through other means. If you want to learn more about the pros and cons of car title loans and who you can contact for more information, continue reading below. This brief auto title loan guide will cover what you need to know about applying for this loan and what you can expect when you receive the loan.
What Are Car Title Loans?
Car title loans are secured loans that allow you to use your vehicle as collateral in exchange for money. Because your vehicle serves as collateral, the lender has the right to possess the vehicle if you default on your payments.
These loans are usually short-term and have high-interest rates with very few requirements. This means if you have poor credit, you can still qualify for the loan.
These lenders are typically more concerned with the value of your vehicle. In most cases, the lender won’t consider your credit score or history.
How Do Car Title Loans Work?
Once you find a lender that authorizes car title loans, you can send them your information for an application. Most lenders only accept borrowers who outright own their vehicle and who no longer make payments on their vehicle. Some lenders allow you to take equity out on your vehicle even if you still make payments on the car, but this is a high-risk situation.
Compare Lenders
Before you settle on any car title lender, be sure to take a look at their reviews. Some lenders practice predatory lending practices, which can keep you in debt. Be sure to work with a reputable lender with good reviews.
Apply for the Loan
Applying for a loan on a car title is a relatively straightforward process. Most lenders require you to send them your personal information and information about your vehicle.
Information needed for the application:
- Vehicle year, make, and model
- Odometer reading
- Your personal contact phone number
- State ID or driver’s license
- Proof of income
- Clean title of the vehicle
If the lender approves you for the loan, they will ask you to take the vehicle to one of their storefronts. While there, a representative will take photos of your car, and they will take possession of the title.
They will also install a tracker on your vehicle to ensure they know where the car is at all times. Since the vehicle is the collateral, they want to be able to locate it in the event you default on the loan.
Accept Payment
Most of these types of companies don’t have cash on hand for safety reasons, so you won’t receive your payment at the location you take your vehicle to. When everything goes through, they will wire the money into your bank account, or they may write you a check for your agreed-upon amount.
How Much Can I Borrow on a Car Title Loan?
The amount of money you can borrow for your car title loan depends on the lender. Most lenders allow you to take between 25% to 50% of the value of your vehicle.
Some loans can be as low as $100, whereas others can be as high as $10,000. Even if you are able to take the higher end of the loan, be sure only to take what you need.
Because these loans have high-interest rates, you will have high monthly payments. If you aren’t able to afford the maximum, don’t take that much.
Car Title Loans Pros and Cons
Unlike other types of loans, such as personal loans, car title loans don’t have lengthy or complicated application processes. Since you are offering a form of security, your vehicle, car loans are relatively easy to qualify for. One of the most significant advantages of getting a car title loan is the ease of the application.
Easy Application Process
As mentioned earlier, applying for this loan is relatively easy. As long as you can prove you own the vehicle and have a steady income, the lender will most likely accept your application. Most lenders accept your application within one to two days.
Immediate Access to Money
These loans are excellent options if you need access to money in a hurry. As long as you and the lender agree to the terms of the loan, they can wire the cash once they see your vehicle and get the tracker attached. In most cases, you can receive your money that same day as a deposit, or you will receive the funds the following business day.
Ability to Use Your Vehicle
As mentioned earlier, the lender will add a tracker to your vehicle so they will be able to locate your vehicle if needed. The car title loan lender will have possession of the title, but they don’t need to take possession of your car. This allows you to use your vehicle as you see fit.
Disadvantages of Car Title Loans
Although these loans come with excellent benefits, there are a few disadvantages you should be aware of. For example, these loans typically come with high-interest rates.
These rates are higher than credit cards and can exceed 100% APR rates. This is because the lender has to mitigate their losses. They may provide you with an easy way to access money, but that typically comes with a cost.
You Can Lose Your Vehicle
As you now know, if you don’t pay on your loan, you risk losing your vehicle to the lender. As long as you make your payments on time, you shouldn’t have to worry about losing your car.
As we mentioned throughout the article, be sure only to take what you can handle. If you aren’t able to make your monthly payments comfortably, take only what you need. The last thing you need is to lose your vehicle and have added debt to deal with.
Short Repayment Terms
Depending on your lender, you may only have between two weeks to two months to repay your loan. Some lenders can provide you with additional time; just be sure to read over your the terms and conditions of your loan before you sign anything. Not only do you risk losing your vehicle, but you risk having additional fees tacked onto your monthly payments if you’re late or miss a payment.
Auto Title Loan Alternatives
Although title loans can promise you quick access to cash, you should still be wary of taking them if you aren’t able to handle those monthly payments. There are other alternatives you should take into consideration.
Negotiate Your Debts
If you need access to cash to repay an already existing debt, you can reach out to your lenders for assistance. They may be willing to work out a payment plan arrangement or more time to pay off the debt.
There are also accredited credit counselors that you can reach out to for assistance. They can negotiate on your behalf and try to get you a better deal.
Friend and Family
Everyone’s situation with their friends and family is different, but if you can, reach out to someone you trust to see if they can lend you a hand. Depending on who you reach out to, you can create a contract between the two of you, promising to pay them back.
This helps you avoid paying high-interest rates or taking out an auto title loan. There are also local churches and non-profit organizations that can provide you with some form of assistance.
Take Out a Personal Loan
If you have a good relationship with a local credit union or with your bank, you can reach out to them for a personal loan. Their rates may be better than an auto title loan, but they might have stricter approval requirements.
Several online companies can also authorize unsecured loans, but be wary of them. If the offer sounds too good to be true, it probably is.
Be sure to check out the APR and the loan terms to make sure that you aren’t working with a predatory lender. These lenders offer you loans with unrealistic repayment terms that make it nearly impossible to repay back.
Credit Card Cash Advance
If you have a credit card with a cash advance option, you can use that to take out cash to pay for what you need. This option does come with high-interest rates, and you may need to pay a cash advance fee on top of that interest rate, but this option may be a bit easier to manage.
You don’t have to put up any collateral when you go this route, and you already have access to money. You won’t have to wait for an approval. Most credit card companies allow you to take money out of an ATM. All you have to do is pay back the monthly minimum to ensure you keep your line of credit open.
How to Get the Best Car Title Loan
If you want to reap the most benefits of car title loans, you should be sure to partner with a reputable lender. As mentioned earlier, be sure to research the company before you sign anything.
Many lenders focus more on approving you and getting you the money you need instead of honestly trying to help you. They will try to mask their horrible fees in hopes you’re thankful just to take what you can get.
Get Detailed Quotes
Don’t be afraid to ask for a detailed quote from the lender. They should be able to tell you about the exact terms of your loan and how much you will have to pay each month. When looking at the quote, look at the interest rate and see how much you pay to the lender over the loan’s lifetime.
Use a Co-signer
Even though most car title loan lenders don’t focus on your credit score, it wouldn’t hurt to add a co-signer to the deal. If your income is not enough, adding a co-signer can improve your chances of receiving an approval. If you decide to add a co-signer and they agree to guarantee the loan, make sure both of you understand what this means.
In the event that you default on the loan, your co-signer is on the hook for paying off the remainder of the loan. If you both fail to meet your ends of the bargain, the lender can report the debt to the credit bureaus.
Depending on the language of your car title loan agreement, they can also take you to court to recoup their payments. To avoid all of that from happening, be sure to only take what you can comfortably repay and be sure to let your co-signer know about the risks.
Car Title Loan near Me
If you need quick cash and have a clear title on your vehicle, you can reach out to a reputable car title loan company for a loan. Car title loans are excellent alternatives if you aren’t able to get a loan via any other means.
Although car title loans come with excellent benefits, you should keep a few disadvantages in mind. With that said, only accept that you can comfortably pay back, read over the terms of your loan, and only work with reputable car title loan companies. Contact us if you are ready to partner with a reputable car title loan company!