There are moments when you find an emergency, and you are cash-strapped. With no option to turn to, most people look at car title loans as the next best solution. These loans are designed to serve people in need of cash fast to pay bills, cope with an emergency or settle a debt.
If you own a vehicle, it’s easy to get a car title loan since this loan uses your car as collateral in case you default.
One thing though, these loans are often short-termed and come with interest rates. Before choosing to commit your hard-earned car to the agreement, you need to understand what a car title loan is. For other options, check out Space Coast Credit Union auto loans.
When looking to get a car title loan, here are a few things you need to know.
1. What is a Title Loan?
A title loan is a short-term, high-interest secured loan that lets you use your vehicle as collateral. Using the car as collateral means the dealership of the lender can repossess your car when you default on payment or don’t pay on time.
As stated before, these loans usually attract high-interest rates and with few barriers. This makes it one of the best options for people with poor credit scores. Most title lenders don’t consider credit scores and history when offering car loans to borrowers.
2. How to Get a Car Title Loan
At this point, you already know that you need to own a car or have some level of equity in it to get a title loan.
In most cases, lenders require you to have paid off any loan you may have taken on the car or used to pay for the car. The loan borrowed is mostly pegged on the value of the car, with most title lenders offering 25% to 50% of the value of your car. On average, title loans range from $100-$5,500.
As stated before, title loans are short-termed and attract huge fees with high-interest rates. Most lenders offer 15-30 days on their loans before demanding repayment. The lenders rely on agreed-upon figures when remitting loans to borrowers. This includes the interest rates and any additional fees charged on the loan.
However, some lenders employ calculators to help them calculate the loan’s repayment, especially when dealing with a depreciating loan. With an estimate of how much you want to borrow, you can get a rough idea of the amount you are required to pay. Most of these calculators require you to key in the loan amount and the interest rate. Lenders are often encouraged to use these calculators before the application process; this way, you can get a rough idea of how much your payments are.
The interest rates charged by title lenders have an annual percentage rate of more than 300%. This is considered higher than most types of loans, including credit card interest. Before securing a car title loan, ask your lender to provide you with an APR and the total cost of the loan. Using this information, you can compare with other lenders to find what works for you.
3. Documents Required for Car Title Loan
When applying for a title loan, there are specific documents that are needed to process the loan. These include:
- A valid government-issued identification.
- The vehicle’s title.
- Proof of insurance.
- Documents to show proof of residency, income, or vehicle registration.
The process of applying for these loans is rather simple. All you need to do is present your ID, the car title, and any other necessary documents, and wait for the approval. In most cases, the approval time is within the hour.
4. Car Title Loan Requirement
As stated before, there is a specific criterion you need to meet to be considered for a car title loan. These requirements tend to vary from one lender to another. However, on average, you must:
- Own a vehicle or have equity in it.
- Be at least eighteen years old.
- Hold a lien-free car title with your name.
- Present the car to the lender for inspection. This way, they can estimate the amount they can offer you based on the value of the car.
- Have a proven source of income. However, you can apply using your disability, retirement, or unemployment benefits.
There are several title lenders on the market, each with different terms and conditions. Before committing to one lender, it is advisable to review other options to see what other lenders are offering. The best part is that some lenders allow borrowers to apply for loans through their online portals.
