If you’re in a need of quick loaning options, you’re probably considering getting a car title loan. However, is it a good idea? How much money can you get with it? Will it be enough to cover your urgent financing needs? What are the risks and the conditions? Advantages and disadvantages?
Before you make your choice, it’s important to learn the answer to all of these questions. So, in this article, we’ll discuss the topic in detail to give you a clear perspective on things before you decide to get a title loan.
How does it all work?
The main requirements for getting a car title loan are that you own the car and that there’s no debt outstanding on the vehicle. If you fulfill these two requirements, the rest of the process is quite simple. You apply, you get approved, and then you give the lender the title to your car.
In some cases, lenders will put a GPS tracking device on your car, or even get a copy of your keys to ensure compensation if you fail to repay the loan.
All in all, it’s a simple process that doesn’t require you to have an outstanding credit score, which makes it an excellent solution for people who are struggling to get approved for traditional loans.
How much money can I get from it?
Now, the answer to this question mostly depends on your car’s market value at the time of the loan. Usually, you can borrow about 25% of the car’s value. On average, those prices range from 100$-5000$, but some lenders allow you to borrow much more than that.
So, all in all, the money you get from a car title loan will depend on the value of your car and the lender’s policies and rates. That’s why we advise you to carefully consider every lender you encounter.
How do car title loans differ from traditional bank loans?
As we previously mentioned, the main difference between the two is that banks require you to have a good credit score before they can approve you for a loan. The bank has no guarantee you’ll pay back, so they have to check your financial history to make sure you’re not too much of a risk to them. On the other hand, auto title lenders don’t check your credit history, so the risk is much higher.
That’s why they have to take your car as a guarantee, and their interest rates are usually a bit higher. Still, you can get them more easily than bank loans, so they can be a good choice if you’re in urgent need of money.
Advantages of getting a car title loan
Even though auto title loans can be a bit riskier than traditional bank loans, they come with certain benefits that make it worth it. Some of the advantages include:
- You’ll get your money quickly- there’s no need to wait for months until you get approved. Generally, you can get your loan in a matter of a few days. That’s why many people with low credit scores opt for this type of loan.
- Your credit score is irrelevant- You won’t have to worry about getting rejected. The only thing you need to have to be approved is car ownership.
- You can still use your car- Even if your car is put as a guarantee for your loan, you’ll be able to use it as you wish during the repayment period. So, if that’s one of your concerns, it doesn’t need to be anymore.
- Apply with ease- you won’t have to get all dressed up for an hour-long interview just to apply for a loan. It only takes a couple of minutes to apply, especially if you’re doing it online. You can click here to read more about the application process.
Of course, to be able to enjoy all of these benefits, you’ll have to find the right lender first. Do your research and ask for advice from people who went through the process before you.
Disadvantages of getting a car title loan
Like every other type of loan, auto title loans also come with some risks. Some of those disadvantages include:
- High-interest rates- As we explained before because the lender has to deal with high levels of risk, their interest rates could sometimes be unexpectedly high. That’s why you need to do your research on the lender’s policies before applying for a loan.
- Risk of repossession- If you fail to fulfill the repayment requirements, the lender has the right to repossess your car to compensate for the loss. Repossession can have a huge impact on your credit score, so don’t lend any money if you’re not absolutely certain you can pay it back as scheduled.
- Short repayment deadlines- If you opt for an auto title loan, you’re likely going to have to deal with shorter repayment schedules than you would with other types of loans.
- There might be some hidden fees- this isn’t always the case, but it’s still a possibility. These unexpected fees mostly have to do with late payments that stack up over time. Be aware of that, and make sure to contact your lender to ask them about these details.
Should I get an auto title loan?
The answer to this question solely depends on your specific needs and goals. Whatever you do, make sure to check for all possible alternatives, and weigh the pros and cons until you find the optimal solution. Don’t forget to do your research on the lender, and never borrow more than you can handle.
The bottom line
Like any type of loan, car title loans come with some advantages and disadvantages. It’s an excellent solution for people with low credit scores who are in urgent need of financial assistance, but it puts your vehicle at risk of repossession. Make sure to have a backup plan for if something goes wrong, and don’t borrow any money if you’re not absolutely certain you can pay it back.