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.