Some people think that car title loans are bad and that they have a bad reputation. They are expensive, as the interest that they charge is much higher than traditional loans from Banks and Credit Unions.
But if you have poor credit, and you need some fast money, your options can be limited. Car title loans will offer you fast money, they can range from $300 to $25,000, it will depend on the equity that you have in your vehicle.
You will also need to have the title in your name, and you must be able to have proof of your monthly income, to show that you can afford the monthly payments.
The title loan laws will be different from state to state, and not all states allow title loans, but you can get title loans in Virginia, and multiple other states.
Car Title Loans
The car title will be the collateral for the loan, and the lender will add their name to the title as the lien holder, Your vehicle will be the security for the loan, and if you do not make your monthly payments, your vehicle can be repossessed.
You can get title loans without having to do a vehicle inspection, the lender will ask for detailed photos of your vehicle, so it will be more convenient for you.
Car title loans are more expensive than traditional loans, but there are plenty of title loan companies, so you need to shop around for the best rate. Some title lenders will charge you triple-digit interest, it would be best not to choose them, and shop around for a lower interest rate.
There are other options for you, but with bad credit, it becomes difficult, and your options are limited, you can get a Payday loan, but you will only get a few hundred dollars, and the interest that they charge is higher than a title loan.
How car title loans work
The way that car title loans work, the lender will look up the value of the vehicle with the Kelly Blue Book, to find out the wholesale value.
The borrower must have the title in their name, and they must show proof of income, to show they can afford the monthly title loan payments.
Most lenders will be able to fund a car title loan within 24 hours, some can offer same-day funding.
When you are choosing a car title loan company, it is best to choose one that will offer you terms of up to 36 months, so that your monthly payments will be affordable, make sure that the lender has no prepayment penalties.
It is best to stay away from short-term title loans, or ones that are due in 30 days, as they tend to have the highest interest rates, and the lender will extend the title loan if you are unable to pay it off. These types of title loans are interest-only payments, so you will eventually have to make a balloon payment to pay it off.
You need to find a car title loan company that will offer you amortized payments so that when you make your monthly payments, you will be paying down your principal balance as well as making your interest payments too.
Car title lenders usually have fewer requirements for you to qualify, but they will all need to see your proof of income, and you will also need to have enough equity in your car.
Why Car Title Loans are Risky
Car title loans have a bad reputation, but with the right lender, they will still be expensive, yet still affordable. If you can get an installment loan, that might be less expensive.
With installment loans you will have a longer term to repay the loan, the interest might be lower, but you will need to have good credit to qualify, as it will be an unsecured loan.
Title loans have lower interest rates than payday loans, but you must shop around to get the lowest rate on a title loan. If you shop around, you can find title loans charging 36% APR.
if you are unable to make your monthly payments, you might lose your car. The Consumer Financial Protection Bureau has reported that 20% of all people that take out a title loan will have their cars repossessed.
The CFPB has also stated that short-term title loans can lead to a cycle of debt, 30 day title loan borrowers renew their title loan multiple times, incurring more fees and interest.
Only 12% of the 30-day title loan borrowers pay off their title loan without having to renew it. the rest of the borrowers could renew their title loans up to 10 times according to the CFPB.
Car Title Loans And Credit
if you have a car title loan, it can improve your credit score, choose a car title loan company that will report to the credit bureaus, so your title loan will help to improve your credit score.
Of cause, if you do not pay, and your account goes to collections, and your vehicle gets repossessed, this will hurt your credit score, but that is the same with any loan that you have.
Alternatives To Title Loans
Many people say that car title loans are bad, but they have no alternatives for people with bad credit to get emergency money, it is hard to find other options for fast money, some say title loans are risky, and they can be if you go with the wrong lender.
Some people suggest that you talk to your creditors before you take out a title loan, to see if they will give you more time to pay, or maybe work out a different payment plan, but in reality that is unlikely to work.
If you need to get a car title loan, make sure that the lender that you choose will get you a monthly payment that will fit in your budget, and do not get a triple-digit interest title loan.
There are plenty of car title loan companies that are out there, so you must do your homework and find the best one for you.
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