Car title loans are usually high-interest and short-term and require you to attach your car as collateral before borrowing money. If you have a bad credit score, this may be just the place for you as title loan lenders aren't keen on your credit history. However, there are some obstacles you may face along the way. Are you looking to get a title loan? Here are some essential things you need to know first.
What Is a Car Title Loan?
This is a secured loan that lets you use your vehicle as collateral. Since your car is responsible for securing the loan repayment, the lender will repossess it if you default on your payment.
How Do They Work?
If you need a car title loan, the first thing to do is to approach a lender that offers those loans on the condition that you are the outright owner and your title is lien-free. During the application process, there may be a need to show the car, the car title, and your license to your lender.
After approval, your lender may ask you to hand in your car title before giving you the loan. Typically, title loans have 30-day terms, although the lender may determine your loan terms. You will therefore need to make a lump-sum payment as soon as your loan period ends. On top of the borrowed money, your lender may ask for some interest and fees.
Untimely repayment could mean you lose your car that serves as collateral. Therefore, before taking out this type of loan, make sure you'll be able to pay it back on time.
How Much Can You Borrow?
Different lenders offer different loan amounts. Loan limits, however, range from 25% to 50% of your car's total value. In this case, the lender may need to examine your vehicle to establish its value.
Pros of Car Title Loans
Here are some of the advantages of these types of loans:
- Credit checks aren't necessary.
- You can get quick approval.
Cons of Car Title Loans
Despite having numerous advantages, there is a downside to title loans too. Some of the drawbacks include:
- They come with extremely high interest rates.
- There are short repayment periods.
- There is the possibility of losing your assets.
If you weren't sure of what you are getting into, the above points would light your path. Contact a provider of car title loans to learn more.Share