What Are Title Loans?

When you need money fast it pays to be creative. One of the best ways to raise capital very quickly when you’re in a pinch is to take out a title loan. These loans are easy to qualify for and can help get you back on your feet in no time. Here’s what you need to know about title loans and how they can help you get out of a jam.

Introduction to Title Loans

When you take out a title loan, you can use the money to cover any unexpected or unanticipated cash need. You can get a title loan by using the title to your vehicle as collateral for the loan. Title loans are a great option for anyone with poor credit who has a clear title (i.e. lien-free) to their vehicle. You will also be required to provide proof of income, the vehicle’s registration, and a government-issued picture ID.

As long as you have the items mentioned above, you shouldn’t have any difficulty obtaining a title loan and walking away with a hand full of cash.

Advantages of Title Loans

One of the greatest advantages of title loans is the fact that the approval process is typically exceptionally fast. It is not uncommon for borrowers who walk into a title loan office with all of the appropriate documents to walk out with thousands of dollars in cash in just a few minutes. Try getting money from a bank that fast!

The reason these loans can be approved so fast is that the lenders specialize in making loans to borrowers with poor credit scores. Loan applications are therefore streamlined to gather only the information necessary to properly underwrite the loan, without any of the complexity and “red tape” typically associated with bank loan applications. Unlike banks, who only loan money to the people that don’t need it, title lenders understand a borrower’s immediate cash need and work hard to meet that need.

If you apply for a conventional bank loan, the bank will be very interested in your credit score. Banks will put you through a lengthy application process that can take weeks or even months before you even learn whether you were approved or denied. Who has time for that?

For folks who are in a bind and need to access money very quickly and can’t afford to wait for a bank’s approval process, title loans can solve big problems. Need cash to keep your business afloat until your customers pay? Need quick cash to avoid a late fee or utility disconnect? What about an unexpected medical bill or home repair that needs immediate attention? If any of these situations ring true, you may want to consider a title loan the next time you’re faced with an unexpected or unanticipated cash need.

Interestingly, the Federal Reserve Board in 2017 found that 44 percent of American households surveyed could not cover a $400 emergency expense. For a borrower in this situation with past credit difficulties, a title loan can be a good option.

Things to Look For When Seeking a Title Loan

While it’s true that title loans are a fantastic way to get your hands on cash very quickly these loans do come with some concerns. As long as you are careful, you can benefit from a title loan and they really can help you when you’re having financial troubles.

The monthly fee, or “service charge”, is going to be one of your biggest concerns. It is critical that you not only make timely payments on your loan each month, but that you also strive to pay down the principal balance as well. The faster you pay off your balance, the fewer fees you will end up paying in the long run. The best advice is to pay on time and pay off as fast as possible. Remember, title loans are for short term cash needs only. They should not be viewed as long term financial solutions.

The most important factor of all when shopping for a title loan is that you find a lender you can trust. Remember, you are using the title to your vehicle as collateral, which means that the integrity of your lender is of utmost importance. Unlicensed or unscrupulous lenders should be avoided at all costs. How can you tell if you’re lender is trustworthy? Find out whether they are a member of the Community Financial Services Association and subscribe to the CFSA Best Practices. The Best Practices are a set of guiding principles that will ensure that you are treated fairly and that your loan is handled with the utmost care and professionalism.

The Bottom Line

In wrapping up there are a few key takeaways here to keep in mind. First of all, you should typically only take out a title loan as a last resort or an emergency option when more conventional forms of financing are unavailable. Second, you should strive to make your payments on time and pay off the loan as quickly as possible to reduce the total amount of fees or service charges on the loan. Finally, always be careful with your selection of a title lender. Choosing a lender who is licensed in your state and who is a member of CFSA and subscribes to their Best Practices is an excellent place to start when searching for a trusted source.

If you are looking for a title loan, Lending Bear can help! Simply apply online today to speak with one of our friendly and professional team members.