How safe are Car Title Loans?
A car title loan is a short-term loan secured by your auto title. In a dire situation, where you are broke and have to wait for your paycheck for another 20 days, a car title loan can help. If you have fully paid for your car and the title is under your name, you are eligible for a title loan. Although they come with short loan terms, these loans offer access to quick cash.
Are car title loans online safe? And do they work? In this guide, find out the risks and the benefits of car title loans.
What are Auto Title Loans?
A car title loan is a product that allows a borrower to use their vehicle as a form of collateral through high interest and short-term funding. These loans allow for quick approval of a short-term loan. Your vehicle serves as collateral once the title is handed to the lender until the loan is paid in full.
If for instance, you are in urgent need of money to cover a medical bill, a title loan can come in handy. Because these loans are very expensive, you risk losing your vehicle if you fail to pay up within the agreed period.
How Auto Title Loans Work
Just like in any other loan product, a borrower must submit an application for the loan. You may be asked to provide your employment information alongside other personal details. Because the lender withholds the car title loan as collateral, they may not verify the details.
Once approved, the lender withholds the title until the loan is fully paid. You get an approval of a particular loan amount depending on the value of your car and not your credit history. The loan could range between 25 and 50 percent of the value of the car. If your vehicle has a lien against it, the lender may not consider it.
Borrowers looking to apply for a car title loan can fill an online application or visit the loan store. Once approved, go through the details before appending your signature. Be sure the loan terms read right. Sometimes, the best APR is used as a marketing tone while the actual document records a higher APR and other terms. You are under no obligation until you sign the actual loan agreement.
Auto Loan Repayment
Because title loans are short-term, you may be expected to pay back the balloon payment in full within 15-30 days. There are cases where you could choose to extend the period by rolling over the loan. A rollover could secure you 30 more days after the period given for the full repayment. However, note that rolling over is more expensive. Each time you pay, new loan fees are applied.
While these loans may be criticized for their terms, they are safe and offer a quick cash option. Many times, lenders accept applications regardless of the condition of past credit history. Sometimes, credit checks are not run, meaning a borrower could be approved almost immediately. If you are in need of quick cash, an auto title loan may be your only option.