Your car is your great possession; you use it to travel from one place to another safely. But it’s not the only use of it. Another best way to put it into a suitable method is to get car title loans. This secured loan is becoming a popular payday loan choice among people as it is easy to acquire. People can have their hands on this sort of loan any time they need some cash. The best part about this loan is that you don’t need a good credit score to grab such a loan. Tons of people have bad or no credit situations. Therefore a car title loan becomes a blessing in disguise for them. If you are wondering how a car title loan works, continue reading and exploring every aspect of this loan.
How Does it Work?
A borrower approaches a lender with his car and its title. He asks the lender that he is looking for a car title loan. A lender checks the title document of the vehicle and also the market value of the vehicle. A borrower can get a percentage of the market value of a vehicle as a loan amount. This percentage varies from one lender to another. On average, a borrower can expect to get a $1000 car title loan. Generally, you can get a loan within one or two hours of your loan application. A lender will keep your car title until the day your car loan is repaid.
What Types of Auto Title Loans can You Get?
There are two common types of car title loans.
Single-Payment Loans – As the name describes it all, once you acquire this loan, then you can repay it in just lump-sum. The lender usually gives you one month to pay back all the amount. This car title loan features an average APR of 300%.
Installment loans – You get the money and pay it back in the installment. There are multiple installments for a period of three to six months. You get this loan with an average APR of 259%.
As the interest rate is lower on a title loan than other payday loans, people opt for it. However, it’s a risky loan when you don’t pay it back; then, the lender repossesses your car. If you can keep up with a single payment, then go for it, you should pick an installment loan as it comes with a flexible payment schedule. According to a report of the Consumer Financial Protection Bureau, one in five people who get car title loans has their vehicles seized. Therefore, you need to consider the risk factor before applying for any car title loan.
Impact of Title Loans on Your Credit Score
This secured loan has little to no effect on your credit score. When a lender issues a loan amount against your car title, he doesn’t check your credit score and history. What if you don’t repay the loan? In that case, a lender repossesses the title, and you end up losing your vehicle. He won’t send you to the collections, which always hurts your credit score even more. If your credit score is not very good and you don’t want to destroy it any more than you already did, then going with car title loans seem like an excellent financial choice.