Why Obtain a Car Title Loan?

Get Fast Cash with a Car Title Loan

For anyone looking to get their hands on some cash fast for whatever reason, a car title loan may be your best option. There are a number of lenders available but many people either don’t have the credit, or they just need something short term. The best part of this form of loan is that they don’t run your credit. While this sounds straightforward, this can get you further in debt if you are not careful. Another higher risk you are running is losing your car as it is used for collateral.

How Does an Auto Title Loan Work?

Let’s say you had some jewelry that you were going to be taking to a pawn shop. There are people there that are going to appraise it and examine it to see how much it really is worth. They are going to give you a set amount of money and you give them the jewelry. They also are going to charge interest. If for some reason you do not pay back the money of the loan, they are going to keep your jewelry. This is similar to a car title loan except you are using your car as collateral.

Your car is evaluated and an amount is determined. The estimate is based on wholesale value. Your car’s title is held until the loan is paid off in the specified amount of time. The loan is different from when you initially bought your car. It’s a short term form and the interest is typically higher. Not paying the lender back results in higher interest being added as well as late fees. This leads to the lender getting your car.

How to Qualify For an Auto Title Loan

For the sole reason the loan amount you are given is based solely on your car’s value, these loans are only applicable to those who own their car and have the title. You are not going to be able to even consider this type of loan if someone else holds to title to your car. There may be a minimum age requirement for some lenders as well as having a set amount of monthly income and you also need to have proof of your current residence. This can usually be in the form of a bill that is in your name.

Read the Entire Agreement

While it seems simple to get in your car and drive to a lender, there is typically a little more involved. Before being OK with this type of loan, you need to read over the entire agreement and make sure you have a clear understanding of it. You need to have an understanding on how the lender is calculating the interest. While you use a 3% rate, which is good, you need to make sure it’s not 3% for each month you have the loan. This is going to lead to a heft rate of 36%!

Read about late payments and what the overall total length of the repayment plan is. If you are borrowing $5,000, you obviously are going to need more than 2 months to pay it back. Make sure an agreement is reached between the lender and yourself.

Why Obtain a Car Title Loan?

With the state of the economy seemingly worsening over recent years, it us becoming harder and harder to make ends meet. Sometimes you have some extra money that you try to hold onto for a rainy day, other times you wonder how you can come up with the extra money to pay your bills. There are different methods of acquiring some fast cash without committing any type of crime punishable by jail time or calling long lost relatives. These methods include different types of loans; one such loan you may consider is called an auto equity loan.

An auto equity loan is normally a short term loan supplemented by some form of collateral, normally in the form of your vehicles title loan, or in some cases, using your current home value to aid in the purchase of a new vehicle. These types of loans are normally very fast and allow you to take out any size loan up to the current wholesale value of your vehicle without subjecting yourself to background checks or credit checks which could further hurt your credit.

There are two main types of auto equity loans. The first type involves using your current vehicle as collateral for the loan. In order qualify for this type of loan, most companies require that the vehicle be less than ten years old, the vehicle must be worth at least $2,500, and the applicant must be at least 18 years of age. If you meet these requirements, you may be able to apply and qualify for a loan of this type. Since you are putting up some sort of collateral, these types of loans are usually much quicker and simpler than some other types of loans, usually resulting in receiving your requested loan amount the same day you apply.

A standard auto equity loan is normally a very short term loan, usually lasting a month or less. The companies add on an annual percentage rate (APR) to cover their expenses for writing the loan as well as covering their payroll. Normally these annual percentage rates are somewhere in the area of 20% of your total loan. Most companies will loan you up to the amount your car is worth but usually have a minimum loan amount that varies from company to company but normally range in the $500-$1,000 area.

In order to apply, most companies also require that you provide an auto title that is clear of any liens, your personal information, driver’s license, social security card, vehicle registration, proof of insurance, a recent paycheck stub, a recent utility bill, current mortgage statement or lease, and usually up to 4 references. This information is usually reviewed by a loan officer for approval before you receive your loan. Some companies allow you to fill out an online form and approval is done electronically. Since collateral is being used, most companies do not require a background check or credit check, and usually don’t worry about past bankruptcy filings or lack of credit history. This allows those with bad or no credit to receive the money they may need as quickly as possible.

Even though it is called an auto equity loan, you don’t necessarily have to offer up your main form of transportation as collateral. Most companies will also accept motorcycles or some sorts of farm equipment as collateral as long as the total wholesale value of the item meets the loans minimum standards. This policy varies between loan companies so make sure to discuss this option with your lender as well if this is a viable option.

The 2nd type of auto equity loan is using your current home value to purchase a vehicle. Normally, a loan is taken out against the current value of a home in order to purchase a new vehicle and creating a lien against the property as collateral for the debt. This type of loan does have its perks as normally, the interest charged on this type of loan is tax deductible because the property is used as the collateral. Using this type of loan is normally less expensive due to the lower interest rate.

With both types of loans, the usual repayment period is usually around thirty days in which the loan fee is included. If the full loan amount is not repaid within this period, the fee is normally added back on to the total amount owed. Some vehicle owners who use their car as collateral for these type of loans may be tempted to roll over that fee to the next month which is allowed, however it is normally much more costly in the long run to pay the additional fee every month rather than paying the entire balance. Due to this, it is usually best to abstain from these types of loans except for in cases of dire emergencies.
Most companies, in case of financial hardships, are willing to work with you if you cannot make a payment or two. They should supply you with a phone number to contact them in these types of cases and will normally suggest some sort of alternate repayment method or will work with you to find a solution. If payments are still not met and a further agreement cannot be established, the loan company has the option to repossess your vehicle if deemed necessary.

It is always advisable to seek financial advice from a trained financial advisor before seriously considering taking out any sort of loan. Your financial advisor may have a better idea to assist you with your financial needs or may be able to point you in the direction of a reputable lender or service. Make sure if you are in the market to apply for a loan that you do your research on the company to make sure it is a legitimate loan service rather than some sort of scam or scheme to obtain your personal information. Keeping your confidential information from prying eyes should be your top priority as it could save you from a major headache down the road.