Did you know that the annual percentage rate associated with a car title loan in the United States is 300 percent? Car title loans are an essential part of the car buying process for most people. This is especially true when it comes to purchasing a new car.
There are lots of different ways that you can get car title loans near me. You can even get car title loans online. It is important that you have a firm grasp of how car title loans work before you take the steps to secure cash loans on car titles or any other form of auto loan.
Thankfully, you’ve come to the right place to gain more knowledge on what is a car title loan. Continue reading to learn all about how car title loans work and the pros and cons that come with them.
What Are Car Title Loans?
A car title loan is a loan that gets secured through the use of your car or vehicle as a form of collateral. The car gets used by the loan company to secure the loan repayment if you’re unable to repay the loan on time.
Most car title loans are of the short-term, high-interest rate variety. They also have the benefit of having few requirements in order to secure one. This means that if you don’t have great credit you’re still going to be able to qualify. Most times, the bank giving the loan won’t check your credit history or credit score.
How Do Car Title Loans Work?
Car title loans work by seeking a loan through a lender and using your car as collateral. This is only possible if you own your vehicle outright. If you still have financing on the vehicle, you’re not eligible for a car title loan.
The application process involves showing the lender the vehicle itself as well as your driver’s license and the title to the vehicle. Once you’re approved by the lender you’ll exchange your vehicle’s title for the loan. The lender then determines what your loan terms are, though most car title loans have a term of 30 days.
With loans that have a term of 30 days, it is common that you pay them off with one lump sum payment at the end of the loan period. The amount that you owe is a combination of the amount you’ve borrowed as well as any fees and any interests that build up over the 30 days.
One thing that you need to be aware of with car title loans is that if you’re not able to make the payment on time, you’re going to lose your vehicle. It is vital that you take that into consideration all the things to know and think long and hard before proceeding with a car title loan.
How Much Can You Borrow?
The normal loan limit that comes with a car title loan is somewhere between 25 percent and 50 percent of the car’s value. In order to determine the value of your car, the lender will examine it and look it over. Some loans are as small as $100 while other car title loans are as high as $10,000.
When Should You Consider a Car Title Loan?
It is important to note that there is a lot of risks associated with using a car title loan. As many as 20 percent of people who get a car title loan end up losing their vehicle because they’re unable to pay what they own back in full. The majority of the money that lenders make results from their loanees continuing to take out new loans to pay off the car title loan.
Over half of the car title loans that get taken out end up with the loanee in long-term debt. It is a real possibility that you’ll lose your vehicle as a result of a car title loan. It is also a very real possibility that you end up in long-term debt. For these reasons, you should be 100 percent sure before you take out a car title loan.
Pros and Cons of Car Title Loans
Before you take the steps to start the process of securing a car title loan, you should know the pros and cons that come with one. These pros and cons will help you to decide if getting a car title loan is the right move for you and your finances.
Pros of Car Title Loans
One of the big pros of getting a car title loan is that most lenders don’t bother with your credit history or credit score checks. This is great news for people that are in need of quick cash or that have explored and used every avenue of borrowing money. It is especially true for people who don’t have the credit to secure a traditional loan.
Another big benefit that you’ll gain from securing a car title loan is that you’ll have quick access to the money from the lender. This is important if you’re in need of fast cash. The approval process is quick and easy and you’ll have the money within minutes of being approved.
Cons of Car Title Loans
One of the biggest drawbacks of title loans is that they have the potential as a debt trap if you can’t make the payments in time. Over half of car title loans end up becoming long-term debt burdens on the borrowers. This leads to the borrowers taking out new loans to pay off the old ones.
You also need to be aware of the massive interest rates and fees that come with getting a car title loan. These charges and fees add up quickly and can lead to large amounts of debt and even losing your vehicle.
The repayment terms are also short compared to other types of loans. The lender will expect full payment on the loan by the terms they’ve set. Those terms are as short as 15 or 30 days.
Now You’re Ready To Get a Car Title Loan
Car title loans are a great way to get money quickly, and they’re especially great for people who don’t have great credit scores. Dar title loans work by allowing you to borrow money while putting your paid-off vehicle up as the collateral for the loan.
There are many pros and cons to be aware of before you move forward with getting a car auto loan, like the interest rates and fees involved. You should also know that it is a great way to get approved for fast cash in a quick and easy manner.
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