Title loans are a type of secured loan, where the borrower puts up something as collateral. The most common type of title loan is the car title loan, where the borrower hands their car’s title over to the lender until they have repaid the loan. Title loans are very popular because they are accessible to people who have bad credit. In fact, one’s credit score isn’t even checked when applying for a title loan.
This article will explain a few of the top things that you need to know about before applying for a title loan:
How Do Title Loans Work?
In order to take out a car title loan, you need to own a vehicle. You then must sign the car’s title over to the lender, who will assume ownership if you cannot repay your loan. Title loan companies allow borrowers to repay their loan in one lump sum, instead of monthly. With that said, most companies will offer flexible repayment plans. If one were to default, the lender will immediately take control of one’s car, although many will work with the borrower to create a payment plan.
Finding Title Loan Companies
There is no shortage of title loan companies, so you shouldn’t have difficulty finding one. In fact, there are over seven car title loan companies in Phoenix, AZ, alone. When you are searching for a title loan company, make sure to carefully browse reviews and find one that doesn’t charge a lot of interest. You should also find one that works with its customers if one were to default. You can’t predict the future and while you might intend on repaying your loan, something might happen that prevents you from being able to. A payment plan in case of default will help you to maintain ownership of your car.
How Much Can One Borrow?
Generally speaking, title loan companies will allow you to borrow up to half of what your vehicle is worth currently on the market. This could be anywhere from $100 to $100,000 depending on the make and model of your car. When you are taking out a title loan, the lender will require you to hand over your vehicle’s registration documents so that if you default, they can sell it. Make sure to borrow only as much money as you need. If you borrow more than you need, you could be putting yourself in more debt than is necessary.
Downsides of a Title Loan
There aren’t many downsides to title loans. Interest rates aren’t much higher than payday loans are, and one is able to take out a title loan without having good credit. Bad credit can result in disqualification from most unsecured lenders. The ability to still borrow without having to sell your car is great. Remember, though, you can only qualify for a title loan if you are your vehicle’s legal owner and registered keeper. If you aren’t, then there is absolutely no way that you will be able to take a title loan out on it. This also means, if your car is on finance, that you can’t take a title loan out against it.
Early Repayment
Many title loan companies will allow you to repay your loan early and regain ownership of your vehicle. However, you will likely have to pay an early repayment fee if you want to do this. Repaying your loan early will save you a lot of money. Make sure to do your research beforehand in order to find a company that will allow you to do this. Another advantage to early repayment is that you can get your car’s ownership back. Surrendering your vehicle to another person can be very angst-provoking, especially if you are attached to your car [as many people are]. The sooner you repay your loan, the sooner you can get your car.
Speedy Process
The car title loan process is incredibly quick. You can get money in as little as a day. You simply need to apply by phone or email, and you will receive an appointment perhaps the same day. You attend your appointment with your car’s title and sign it over to the company, who will issue you your loan. The money could potentially even be in your bank account by the same day if you apply early in the morning. The efficiency and speed with which title loan companies conduct themselves are in part why they are so popular.
Title loans are definitely one of the most superior types of loans one can get. Remember to consider your options before getting any loan, and ensure that you only take one out if you really need it, and if you are confident that you can repay it.