When times are tough and you need some extra cash, one of the options is to take out a car title loan, but navigating this decision can be complicated. We’re going to look at some of the crucial questions that you should be bringing up before working with someone to take out a car title loan.
If you’re unclear about what a car title loan is, you aren’t alone. A car title loan is a short-term loan that is secured by the title of your vehicle. This means you’re putting your car or truck up for collateral for the loan, and if you default on the loan, the lender can repossess that vehicle. These loans are commonly very helpful when you need a short-term loan, but you have bad credit, and a relatively new car or truck.
You work with a lender, and the lender requires your car title to issue a loan. They will also require some proof of ownership and a valid ID. They will then assess the value of your vehicle to determine an amount that can be loaned. Once you’ve been approved for your loan, you generally can get the cash that same day, or have it deposited into your checking account within a business day.
As with many short-term lending products, the interest rates can be relatively high, when compared to other more conventional forms of lending. In some cases, the annual percentage rate, or APR can reach triple digits. On top of that, there are often origination fees, late payment fees, and repossession fees. You may even have a prepayment penalty with some lenders, so read carefully.
In most cases, car title loans will be short-term, from two to four weeks. Understanding your title loan’s repayment term is critical, not only to paying it off on time but to keep your vehicle. If you have multiple payments for your loan, be sure you know when and how often those payments are needed.
This can be a tricky question, and it can be a question that leads to two very different financial outcomes. Before agreeing to any loan, carefully assess if the loan is right for you and your available repayment budget. Consider your existing expenses and recurring bills, and whether you’ll be able to keep this additional payment obligation for the term of the loan.
There are some alternatives to a car title loan that you may want to investigate before applying for one. There are personal loans, credit cards, and even payday loans, which are all unsecured forms of lending that may work for you.
If you’re unable to make a payment, the most important thing is to communicate with your lender. They technically can repossess your vehicle, but if you work with them, they may be able to offer a rollover loan or other similar solution where you can extend the loan and pay additional fees to avoid repossession.
If you need emergency funding, but can’t use conventional funding sources like bank loans, a title loan may be the perfect option to get you the funding you need, fast. For more information about title loans, or to get started with a title loan application, reach out to Lending Bear today.