When cash is in short supply, many consumers decide to get a title loan. Although the money can be used for anything, most consumers use it to pay off an unexpected expense.
The funds from the loan could be used to pay for unexpected vehicle repairs, or it might even be used to pay rent. Many consumers choose to get a title loan because they have a poor credit score and can’t borrow from relatives.
The good news is that it’s quite easy to get a title loan, but a clear title is needed. Before applying for this type of loan, it’s very important to understand the benefits, downsides and how the process works.
How Titles Loans Work
Title loans work almost exactly like all other collateral loans. By using a car title as collateral, consumers are able to give the lender a guarantee that they’ll get paid back.
The title is used to borrow an amount of money that is based on the value of the vehicle. If the loan money isn’t paid back, the lender will take ownership of the vehicle and sell it. The neat thing about title loans is the fact that you can still drive the car that you used to get the loan.
Many consumers don’t know that several types of titles can be used to get a title loan. Although car titles are used often, some consumers might wish to use an RV, motorcycle or SUV title.
What If the Vehicle Isn’t Paid Off?
Some consumers need to get a title loan, but they haven’t paid off their vehicle. As long as there is enough equity in the vehicle, it’s still possible to get a loan. Lenders know that every situation is unique, so there is always the chance that they’re willing to work with borrowers.
Understanding the Interest Rates
Title loans are frequently associated with massive interest rates. However, not every lender offers terrible rates. Most lenders will give the borrower a monthly interest rate, which isn’t an APR.
It’s not uncommon for lenders to charge 20 percent interest per month, which comes out to 240 percent per year. The convenience of quick money is one of the greatest benefits of getting a title loan.
Should You Get A Title Loan?
A huge benefit of getting this type of loan is the lack of credit checking. Most lenders won’t check your credit score because they’re planning to give you a collateral loan.
Title loans appeal to consumers who can’t get a traditional loan because of bad credit. In most cases, consumers can also get the loan money very quickly. The choice to get a title loan is personal, and while the interest rates can be high, a title loan could really benefit your situation.