What is a Title Loan and Should You Get It?
Title loans, or car title loans and auto title loans are short-term loans that allow the use of the title of the vehicle as a guarantee for the loan. It is also sometimes referred to as a pledge pawn loan or pink slip. A title loan is one of the most expensive loans with APRs reaching triple digits. If you apply for this type of loan, you can lose your car if you don’t pay the loan promptly. Title loans have loan terms of 15 days to one month.
Applying for a Title Loan
Lenders that offer title loans can be found online or at a physical business office. If you choose to apply over the Internet, you simply need to accomplish an online application form. The online application form will ask for your name and contact information, your work information and the details of your vehicle. The lender then provides a list of offices near you that can process your title loan. You need to surrender the title of your car, an ID with photo, as well as the car insurance contract. Depending on the lender, you may be asked to surrender the keys or duplicate of your car keys.
If you are sure you want to obtain a car title loan, you have to follow these tips to get the best results:
Read the terms of the loan
Before signing a loan agreement, you must read and understand the terms of the loan. Government laws state that borrowers must be informed about the total loan cost by the lender. The lender must make the loan applicant understand the APR and loan cost before providing a loan contract. The loan APR includes the fees and rates applied such as the documentation fees, origination fees, processing fees, title charges, lien fees, and late payment fees. As the borrower, you should clearly understand what you are paying for before agreeing to the terms and conditions of the loan.
Take note of the add-ons
Add-ons increase the total loan cost significantly so borrowers must be fully aware of these additional costs. An example of an add-on is the roadside service plan for your vehicle. It is important to consider these additional expenses before agreeing to sign the loan contract.
If your title loan is approved, the loan provider gets hold of your car title as loan collateral. The lender only returns your title when you have repaid your loan. Again, title loans are very expensive. In terms of repayment, you can opt to pay online, pay in person, or by setting up an automatic payment.
If you fail to pay back the loan by the deadline, the loan will be rolled over by the lender. Unfortunately, if a title loan is rolled over, the loan will be subjected to new rates and fees. Should you pay back the loan on your next due date, you will be able to redeem the title of your car. However, failing to pay again traps you in an unending debt cycle. Interest rates can go up so high, you end up paying fees that are higher than the principal amount.
Repossession of your vehicle
If there is one positive thing about car title loans is that you are allowed to use your vehicle even if the title is with a lender. You are still allowed to use it for your daily activities as normal. A lender, however, may require a GPS device to be installed so that they can track the whereabouts of the collateral. Understandably, the loan provider will want some sort of control since the vehicle serves as a guarantee that they will be able to get their money back.
The reality is that lenders can seize the vehicles of title loan borrowers who cannot pay back the loan. The lender has the right to sell the car to recover the amount that you owe them. In some states, the lender is required to return the excess amount from the car sale and to simply get the amount that the borrower owes. However, in some locations, there is no such regulation so lenders can keep the entire proceeds of the sold vehicle.
I don’t want to use my car as collateral, what are my other options?
Unsecured loan. Title loans are notorious for having exorbitant rates and fees. Also, getting a title loan puts your car in the risk of repossession since it serves as the collateral for the borrowing. The good news is that there are plenty of other options that you can consider. Online lenders offer unsecured loan products for poor credit borrowers that do not require any guarantee or collateral. Take note that unsecured loans are also accompanied by high-interest rates but not as high as title loan rates.
Relatives and friends. If you are in dire need of cash, you can turn to your relatives and close friends for immediate assistance. Most of the time, loans from friends or family members are free of any fees. However, if you fail to pay them back, your relationship with them may turn sour. Online lenders offer different types of loans for different situations and qualifications so if you’re not comfortable asking a friend for a quick loan, it is best to look for an online lender who can offer you quick cash.
Go for overdraft protection. If you want to take out a loan because you are having difficulty keeping up with payments, try enrolling in overdraft protection which helps prevent worsening of your credit problems.
Look for a co-signer. A co-signer is another individual who becomes part of a loan agreement and becomes responsible for the payments if the principal borrower is unable to fulfill his or her responsibilities. If your credit is bad but wants to get a good loan rate, you can achieve this by getting a guarantor with a good credit rating.
There is nothing wrong with getting a car title loan and using your car to get immediate cash. However, there are risks involved in getting a title loan including getting your car repossessed by the lender if you fail to pay your loan. It is best to look around and check out other options unless you are quite confident that you can settle your dues on time. Before signing any loan deal, read and understand the terms and conditions indicated in the loan agreement to avoid getting into trouble.
Why Choose Unsecured Loans?
Unsecured loans can help you out during the direst situations. If you need cash fast, unsecured loans like payday loans are the right choice for you. It’s fast, convenient, and highly reliable.
Unsecured loans other similar types can be extremely helpful during emergencies. However, most unsecured loans have high-interest rates compared to secured business loans. Loans with high-interest rates can be difficult to deal with. So choose the right deal that’s best for you.
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