The idea of giving up a car for a quick loan may sound daunting to some people. Most individuals who seek out a title loan have exhausted all other options like borrowing money from financial institutions, applying for a new credit card, or asking family or friends for money.
Once the ins and outs are understood, it can be a blessing in disguise to get quick cash for anything from paying bills or making a large purchase before your paycheck hits your bank account. Here are the truths about title loans that you must know before applying for one.
No Credit Checks
Most title loans do not require a credit check. This is an attractive option for those who do not have the best credit score but are in need of extra funds quickly. For example, maybe bankruptcy was the only option for you previously to get out of a bad financial situation and you were able to bounce back quickly in terms of income. Unfortunately, your credit score does not bounce back quite as quickly which may make a title loan your only option.
More convenient than other loan options
Because there are no credit checks, the process of getting a title loan is much quicker than applying for any loan at a bank. It can even be faster than applying for a credit card, especially if your credit score is not up to par. The quickness of being approved for a title loan beats out practically every other option available.
Loans can be offered same day
If you are really in a tight place and need cash quickly, once you are approved for a title loan, there is a good chance you can get the money you need that same day. You can search different title companies in your area to see which ones offer same day loans.
Short repayment period
One of the downsides of title loans is the repayment period can be very short. Some can be as quick as 30 days. With this being the case, make sure you are looking at a title loan as a final resort or if you have a financial emergency. This is another reason to research different title loan companies beforehand if you desire or need a more extended repayment period
As with other types of loans, like mortgage loans, refinancing is possible. This is a good option if you are unable to pay back your original title loan within the repayment period. If you are looking to lower your interest rate or payments, click here to find information on title loan refinance.
Must own your car
One caveat of title loans is that you must own your car outright before you can be approved. If you are currently making payments on your car, you will not be eligible for a title loan. As soon as your car is paid off and the title is in your name, you can apply for a title loan when the time is right or urgent.
Provide proof of insurance
Yes, you must have full auto coverage to get a title loan from most companies. It might seem a little odd, but there are several reasons why this is a crucial part of the title loan process. First, it is illegal to drive without auto insurance, so that is an easy place to start. Second, when we own our cars, we want them protected in case anything happens, like a car accident that leaves damage to our vehicle. Third, because we are using the car title as collateral for a loan, not only do we as drivers still want our vehicles protected in case there is an accident, but the title loan company wants their newly acquired asset protected also.
When the title loan company possesses your car title, they are essentially letting you borrow your own car to drive around in the meantime. Imagine if you let a friend borrow your car, they wreck it, and they do not have auto insurance. Not a good situation to be in, right? You will be responsible for all the repairs. With a title loan, the title loan company would be stuck with the cost of all the repairs if you do not have auto insurance, and they’ll probably make you pay them back plus interest on those repairs.
Higher interest rates
Another thing to know about title loans is they can have pretty high-interest rates when compared to other types of loans. It is risky to let someone borrow money so quickly without checking as many areas of their background. Because there is no credit check and a chance to get money the same day, it is not entirely surprising the interest rates are higher, but some companies may offer lower interest rates than others.
May not get full car value
Before you walk into a title loan company office thinking you will get the full Kelley Blue Book value for your car as a loan, do not get too excited. Often time, the loan amount for a title loan is not the same as the value of the car. If your car is worth $3,000 and that is how much you would like to borrow, the chances of that happening are slim to none.
Now that you understand all the requirements and options available for title loans shop around to a few different companies to get the best interest rates, a repayment plan that works for you, the most value for your car, and ask if refinancing options are available.