What really is a car title loan? Well, it is just the way it sounds. It is a loan where you surrender your car title as a collateral for a loan from a lender. We have many different types of these loans.
For instance, a traditional lender such as a bank or financial company may take your title as collateral. However, there are some specific car title loan companies available that do this. Car title loan are given by financial institutions that specialize in providing financial loans for people who need emergency money with bad credit.
Why would I get a car title loan?
Well, there may be many reasons you would want to use your car title for the purpose of getting a loan approval. For example, it can because you have some bills that really need to be caught up.
On the other hand, maybe you simply need some extra cash to make it through to the next payday. Maybe you have any emergency that makes quick cash necessary. whatever way it goes, this gives you the ability to make use of your assets and get cash when you need it.
How does a car title loan work?
The way this works generally depends on what type of company you use. In many cases, especially today, you can get a loan on your title and still keep your car. However, in some cases, the lender may require that they be in possession of the vehicle until the loan has been repaid.You would take the car and your title together to your potential lender.
They would value your car by the year, make, and model, and will then determine what the resale value of the car might be. They will also then check the actual car to determine its working condition. In general, you might eventually qualify for a loan up to fifty percent of the total resale worth of the car.
Upon receiving your funds, you either will be asked to make a lump sum payment or if you may be able to make payments upon the loan interest, if you cannot meet up with a full payment. There are interest rates charged for this type of loan and often times, it is somewhere close to 300% interest.
What are the benefits of car title loans
Some benefits of this loan include:
- Cash readily available when you need it
- Does not depend heavily on your credit score
- You get to use the money in any way you see fit
- A relatively small loan, which is very easy to pay back
What are some of the challenges of a car title loan?
Some challenges to this type of thing include:
- It has a higher interest rate
- It has higher fees
- If you default in the payment, you lose your car
- Car title must be in your possession and free from any liens
In conclusion, if you are having difficulties finding a loan anywhere else, have bad credit, but need cash quick for any reason, car title loan is your answer. However, you need to ensure that you have a free and clear title, in your possession, and you have the ability to pay back, or you risk losing your car.