Basically, a title loan is a type of short-term loan that is associated with a higher interest rate. This requires you to present your car as security. So if you don’t enjoy an impressive credit rating, but still want to take out a loan, we recommend that you consider a title loan. In this article, we will introduce you to this concept. Read on to learn more.
What is a title loan?
First of all, this type of loan allows you to pledge your vehicle as collateral. If you don’t repay the loan on time, the lender can take your car from you. Typically, these loans are short-term and require you to pay a higher amount of interest.
So if you have a bad credit rating, you still have a great opportunity to qualify for the loan. Most lenders won’t even consider your credit score and history.
How does it work?
First of all, you need to find a lender that offers title loans. As long as you have a vehicle registered in your name, you may be eligible for this service. Before you submit your application, your lender may need to see your car, license, and proof of ownership.
Once your application is approved, you will receive the loan money by handing over your car title. Although the loan terms are set by the lender, most title loans have terms of 30 days.
In other words, once the loan period ends, you pay back a lump sum payment. You pay back the principal plus all fees and interest. Most of these lenders charge a fee of 25% per month of the loan amount.
This is the reason why title lending is not suitable for everyone. If you don’t pay your loan on time, you know you’re going to lose access to your car. So, if you want to take out this type of loan, just make sure you’re able to make payments on time. After all, you don’t want to risk losing access to your favorite car.
The maximum loan amount
As for your credit limit, it ranges from 25% to 55% of the price of your vehicle. The lender will take a closer look at your car to get an estimate of its value. The loan amount can be $10,000 or more. In most cases, it’s under $10.00, but some people borrow more to meet their needs.
According to reports published by the Consumer Financial Protection Bureau, 1 in 5 title borrowers do not repay their loans and lose access to their vehicles. As a rule, they take out more loans to cover their previous loans.
Long story short, this was an introduction to title loans. If you want to take out this type of loan, we recommend that you consider the information contained in this article. This will help you make an informed decision.
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Wendy is now a financial analyst and writer. Wendy has been writing about finance and personal finance since she was a sophomore in high school. She has also been writing for several online publications and published in The Huffington Post, and Forbes Woman.
Wendy is a credentialed financial analyst and has experience working with financial institutions and businesses. Wendy is also a certified financial planner. When Wendy's not writing, she enjoys tending to her many plants, watching TV, and spending time with her family.
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