Car Title Loans
Some circumstances in life can leave you cash-strapped. You could consider borrowing from family or a private lender, but if your family is unable to lend cash at the moment or if poor credit score is getting in the way of getting a loan, you might want to consider other options. Owning a vehicle with a clean title to it could help solve your financial dilemmas. If car title loans are quite a foreign concept to you and you have interest in getting one, here’s a comprehensive primer about car titles loans.
What Are Car Title Loans?
Like the term implies, auto title loans are loans you take in lieu of collateral, which is your car. A number of online lenders are offering car title loans to borrowers who need instant cash but their bad credit score is hindering them from getting non-collateral loan.
With a car title loan, you will be able to borrow a certain amount of money and leave the title to the lender. You will still be able to drive the car home and use it as you normally would. When you’ve paid off the loan, the lender will return the car title to you.
Who May Take Auto Title Loans?
Car title loans are available for virtually any one of legal age who owns a car. Many online lenders no longer conduct credit checks on borrowers as their vehicles already act as guarantee or collateral. Therefore, if you have no credit history or a tainted credit standing but own a vehicle, you may qualify for an auto title loan.
For some lenders, a fully-paid vehicle is not always a requirement. You may be able to take an auto title loan even if you’re still paying up for it, but you do need to have enough equity over the car. However, this could also affect the amount that you can borrow.
In short, auto title loans are for people who:
Own a car and need immediate source of financing
Have no credit history or own bad credit standing
Principal Amount, Interest Rate and Other Fees
The maximum amount that you can borrow depends from one lender to the other. Some have fixed amount regardless of the value of the car. There are also some online lenders who will allow you to borrow up to 50% of the value of the car.
Alongside the principal amount, you also need to consider the interest and other fees related to the loan. Unfortunately, car title loans tend to have high interest rates, usually hovering around three-digit APRs. Some lenders may express the interest rate as a fixed monthly rate. But by law, lenders are required to declare interest rate as APR. For instance, if the lender says the loan carries 25% in interest, it is actually 300 % APR.
Apart from the interest, car title loans also have other charges, including but not limited to administrative fees, origination fees, late fees and processing fees. When these fees are applied, you could be charged anywhere between $80-$115 even if you intend to borrow just a few hundred dollars.
The Life of the Auto Loan
The loan term of car title loans is dependent upon the lender. Some would impose a 30-day deadline for their auto title loans, while others may allow for several months to a few years. The loan term will also affect the principal amount and the interest rate.
Paying the Loan Off Early
It’s possible that you can already pay the loan off a few months earlier than the agreed date. You could get over the loan, get your car title back and move on with your life. If this is your desire, you need to check with the lender if they also impose pre-payment charges. Some lenders may be happy to let you pay off the loan earlier than agreed at no charge at all while others are strict about this policy. After all, paying the auto loan off early could mean losing profit from those remaining months that you would have to pay for.
Consequences of Missing Your Due Date
Missing your payment dates could result to a number of consequences.
Rollover is an option if you don’t have enough cash to pay the loan off and would like to create a new auto loan and roll over that balance to the new loan. This might afford you some breathing room and chance to gather the cash you need, but you’ll have to pay higher interest and a new set of fees.
Repossession is a legally binding agreement that you signed with the lender and your vehicle could be repossessed in the event of a delinquent payments or default. In short, you could lose your car.
If you feel like you’re not going to make the payment on time, it’s best to inform your lender and try to negotiate. They’re more likely willing to extend the auto loan term or even change your due date if that means you’ll be able to pay them back.
Highlights and Drawbacks of a Car Title Loan
For some people, car title loans do seem like a very viable financing option especially when they’re unable to get financing from their own banks and other lenders. After all, auto title loans have nominal requirements, don’t require credit checks and are available for people with bad credit score.
On the downside, car title loans tend to get very expensive due to their interest rates and other fees. Most of all, the lender may assume ownership of your car if you fail to give your payments. If this happens, you’re essentially given a small amount of money only to lose your vehicle.
Are Car Title Loans Right for You?
There is no straight answer as to whether an auto title loan is right or wrong for you. Do consider your financial circumstances, the reputation of your lender and if you can afford the loan. If the rates are too steep, you might want to consider other financing solutions in order to come up with the amount you need.
So, you’ve already exhausted all the financial options you get possibly get and you have nowhere else to go to get instant cash to solve an urgent financial situation? You can use your car and get the money you need through car title loans!
Car Title Loans Defined
Car title loans are a type of secured loans wherein you are using your car title as collateral for your loan. This means you are pledging your car as payment for your loan in the event that you fail to pay your loan back. The great thing about car title loans is that they are faster and easier to obtain. Since you are giving your lender a form of security for your loan, they tend to release such loans in a matter of minutes up to within the day.
The drawback to such title loans though is the interest rate. In addition, lenders also perceive cars as a depreciating commodity and thus, they take this into consideration when granting you the loan. The amount they can offer to lend you will be dependent on the value of your car after the loan term, the depreciation value and your likelihood of defaulting on your loan payments.
Inflation and economic crisis are leaving more and more people in a state of constant financial struggle. What used to cost less years ago are now bleeding our wallets. Sad to say, if they’re the essentials like food, healthcare, education and shelter, you will really have to do everything to make ends meet.
But sometimes you still fall short despite your desperate efforts. These are the times when unexpected expenses come up and you don’t have the back-up funds to use in case of an emergency. If you own a car with a clear and free title, there’s a great chance that you can survive these circumstances by getting car title loans.
You probably have not thought about using your car in bailing you out of a financial emergency, but they really are effective if you know how to get the best deals and make them work. Furthermore, here are 4 reasons why car title loans are great option for financial shortcomings.
Car title loans are available for people with poor credit score. Have you tried getting loans from mainstream lenders despite having poor credit score? You probably already know how a pain it can be. It’s likely that your application can get rejected or that they’ll give you a bad deal.
The good thing about car title loans is that you can get them despite your poor credit standing. Lenders gear towards the value of the car and your capacity to provide repayments than on your credit score. A lot of lenders don’t even ask for a credit report. So the next time you hesitate about getting loans because you have poor credit score, turn to car title loans for the much needed approval.
You can get a bigger loan, depending on your car’s value. Sometimes, short-term payday loans just don’t suffice for big-ticket expenses like medical procedures and home repairs. If you own a car in great condition that still has high market value, you can loan up to half of its appraised value.
You still get to use the car. Since you’re not pawning the car itself and only need to leave the car title with the lender, you can still use the car like you normally do. You don’t have to alter your lifestyle and routine or come up with alternative transport. And by the end of the loan term, you will be able to re-acquire the title and all is back to normal.
Getting car title loans is a fast and easy process. Thanks to streamline process and minimal requirements, you can take the required amount as fast as 30 minutes. If you’re in the face of a financial emergency and you can’t wait for days of approval from your mainstream bank, then a car title loan should solve that problem.
Given the many benefits of car title loans, you should also weigh them with the risks. If you become delinquent or default on your payments, you could permanently lose your car to the lender. aside from that, your credit score could dive down further. But if you’re responsible and committed enough to follow the payment schedule, then there should be no problem. Take the time to discern your financial needs and circumstances before getting car title loans, or any other type of loan, for that matter.
When Lenders Reject Your Application
Most, if not all, mainstream lenders nowadays rely heavily on the borrower’s credit score to determine if you’re going to get their loans or not. If you’re unfortunate to currently nurse poor credit score, you might also end up with rejection. But all hope is not lost. You can still improve your credit score and find solutions for your financial dilemma. If your bank or another mainstream lender rejects your loan application, here are the next few steps that you should take.
Identify What’s Wrong with Your Credit History
It’s not enough that you know you have poor credit score. You have to know “why.” Looking back, did you tend to spend more than you earn? What were the areas in your lifestyle where you tend to overspend? Did you care enough about settling your bills on time?
Knowing what was wrong with your previous financing habits will help you breed better ones today and the future. Furthermore, these realizations will help you avoid making the same mistakes. Perhaps this time around, you could focus on earning more so you can sustain your lifestyle without damaging your finances. Or, you could cut back on certain luxuries in order to fit everything into your budget.
Don’t Apply for More Loans Just Yet
One rejection should be enough to get you to study more on your finances. If you still persist of applying for loans with other lenders, your credit score will continue to dig down deeper. This will set you up in what is called the rejection spiral. Not only will you get rejected for loans, you could also lose the ability to apply for certain utility services, get a rental home or even obtain a job.
At this point, it would be better to create a strategic plan to keep you afloat. Manage your cash properly and if possible, don’t use your credit cards for the mean time. You could try to find another job or find ways to cut down costs in your lifestyle. Simple sacrifices like opting for generic brands, foregoing dinners out and retail therapies should help you free up more money that you can use for more important matters. Strive to get back on your feet so that the next time you apply for loans, you’ll feel more comfortable about paying them up without stress.
Look for Alternative Solutions
You’re definitely not limited to mainstream loans. If you’ve come to a point of desperation and you need some extra funds fast, you could take advantage of car title loans.
Car title loans basically act like any other type of loan. You could use the money as you see fit. The only catch is that you’ll have to leave the car title with an online lender throughout the duration of the loan term. You’ll have to keep paying up for the loan, and by your last payment, you would be able to get the title back.
It’s a great alternative for mainstream loans because car title loans also cater to bad credit borrowers. Don’t worry about your poor credit score, car title loans will still allow you to get a loan and get you back on your feet. And if you’re more careful with your finances this time around and makes the effort to settle all your payments on time, including those of car title loans, you would find yourself in a much better financial place pretty soon.