Basically, a title loan is a type of short-term loan that comes with a higher interest rate. This requires that you present your car as collateral. Therefore, if you do not enjoy an impressive credit rating but still want to avail a loan, we suggest you consider a title loan. In this article, we are going to introduce you to this concept. Read on to find out more.
What is a title loan?
Firstly, this type of loan allows you to pledge your vehicle as collateral. If you don’t make loan payments on time, the lender can take your car from you. Usually, these loans are short term and require you to pay more interest.
So, even if you have a bad credit rating, you still have a good chance of qualifying for the loan. Most lenders will not even consider your credit rating and history.
How does this work?
First, you need to find a lender that offers title loans. As long as you have a vehicle that is registered in your name, you may be eligible for this service. Before submitting your application, your lender may need to see your car, your license and proof of ownership.
Once your application is approved, you will hand over the title of your car and receive the loan amount. Although the terms of the loan will be set by the lender, most title loans have terms of 30 days.
In other words, after the loan term is over, you will get back the lump sum payment. You will pay back the principal amount plus all fees and interest. Most of these lenders charge a fee of 25% of the loan amount per month.
This is why title loans are not right for everyone. If you fail to repay your loan on time, know that you will lose access to your car. So, if you want to take this type of loan, make sure that you will be able to make the payments on time. After all, you wouldn’t want to risk losing access to your favorite car.
maximum loan amount
As far as your loan limit is concerned, it would be between 25% to 55% of the cost of your vehicle. The lender will examine your car closely to estimate its value. Loan amounts can be $10,000 or more. In most cases, it is less than $10,00, but some people borrow more to cover their needs.
According to reports released by the Consumer Financial Protection Bureau, 1 in 5 title loan borrowers fail to make payments on their loans and lose access to their vehicles. Usually, they take more loans to repay their previous loans.
Long story short, it was an introduction to title loans. If you are looking to avail this type of loan, we suggest that you consider the information provided in this article. This will help you in taking an informed decision.