If you need cash, did you know you can use the equity in your car without giving up the car itself? Here’s what you need to know about car title loans.
Did you know that you can leverage your car title and turn it into quick cash? That can be a lifesaver in an emergency situation.
There are about 2 million people in the United States who have used car title loans to get money in a pinch. If you’re looking at different loan options, a car title could be a way to get a short-term loan, even if you have bad credit.
Read on to learn everything you need to know about title loans – the risks, the rewards, and everything in between.
What Is a Title Loan?
Let’s start off with the basics. If you’re unfamiliar with a car title loan, here’s what you need to know. A car title loan is a loan where you use your car’s title to get cash quickly.
These are meant to be short-term loans that are paid back in 30 days or less. They can be compared to payday loans, in that they’re typically used to get cash quickly, but you use your car’s title instead of your next paycheck as collateral.
If you’re expecting to use your car title to renovate your kitchen or pay for another big expense, you can forget about it. Car title loans are small loans that are $2000 or less.
How Can You Get a Title Loan?
When you try to get a traditional loan, you have to go to a bank, fill out an application and show proof of income. There will also be a hard pull on your credit report. You basically have to prove to the bank that you’re creditworthy and you’ll pay off your loan or card quickly.
Plus, they take time to process. You probably won’t have access to cash for at least 10 days.
It’s a completely different process with a car title loan. You do your research on car title companies and contact a company like Todays Financial Services.
The first thing you’ll notice is there isn’t a credit check, so if you have bad credit, you can breathe a sigh of relief. You don’t have to show proof of income.
All you have to do is show that you are the owner of your car. You can’t owe payments on a lease or car loan and use the car for collateral because the bank is the true owner of your car, not you. But, if you have paid off your car, you are free and clear to use the title to get a short-term loan.
What Are the Risks of a Car Title Loan?
As with many financial decisions, there are risks involved.
You need to create a budget for yourself to know what you can afford because if you fail to pay your loan back on time, your car could be repossessed. That means that you won’t have a way to get to work, to school, cruising around in your Toyota, or grocery shopping. You really need to make sure that you can pay your loan.
Just because your car gets repossessed doesn’t mean that you don’t owe any more money for the title loan. Title lenders can sell your car and charge you for the expenses to tow and sell your vehicle. You’ll get hit with more expenses for a car you no longer own.
If you decide to get a title loan, know what the laws are in your state. Some states restrict title lending, or they have a cap on the amount you can borrow. Other states allow for no cap on the size of the loan and can allow over 100% interest.
You should be well-versed on the laws in your state to avoid predatory lenders. There are some lenders that will skirt around the law and use the term customer instalment loans in their contracts. By calling them instalment loans, they can charge whatever they want for interest, and make a short-term title loan last for years.
That’s why it’s so important that you read the contract fully and know what the laws are in your state.
How to Find a Car Title Company to Work With
While the risks of title loans seem scary because of predatory lenders, it’s good to know that there are quite a number of legitimate title lenders out there.
Some lenders will keep your car as collateral while you pay back your loan. Others will just hang on to the title and allow you to drive it while you’re paying back the loan.
You also want to be sure that they’re licensed to operate in your state. That’s the first clue as to whether or not they’re reputable. Take the time to do online research because it’s worth it in the long run, even if you need cash immediately.
Start by looking up companies at your local Chamber of Commerce and the Better Business Bureau. Companies that are involved in the community are less likely to be fly-by-night companies. They depend on a positive reputation for their business.
Title loans can be complicated and you want to work with a lender that will help explain the process to you. If your title lender is trying to hide something like interest terms, it’s a clear sign you should run. The more up-front a lender is about their terms and the process, the more likely they are to be reputable.
Title Loans for Fast Cash
Title loans can be a great way to get cash in a hurry if you have no other options. At the same time, you have to know the potential risks involved.
Do a budget beforehand and be 100% certain that you can pay the loan back quickly, along with any other fees and interest.
You also need to take the time to find a reputable lender. Not all title loan lenders are the same and you want to work with one with a long track record of helping people.
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