Have you started doing research about what type of options you have when it comes to short-term loans? If you have, chances are good that you have come across the option of taking out a car title loan. Car title loans are short-term, secured loans that allow you to borrow money based on the value of your vehicle that you own.
If you are facing a financial crisis, such as an unforeseen medical emergency, damage to your house or a second car, or are simply in need of an injection of some cash to stay afloat, a car title loans can be a fantastic resource.
Why? Keep reading to find out how car title loans work.
Where are car title loans?
As previously mentioned, car title loans are a type of short-term, secured personal loan. That means that instead of being tied to your credit score, they are tied to something of value that you already own.
Car title loans can be a great resource and help to people who are struggling with bad credit because most title lenders do not even check your credit score to decide whether or not you qualify for a loan.
Want free money?
This is one of the primary reasons why you should consider getting a car title loan.
If you struggle with bad or no credit, getting approved for a traditional bank loan, or even an online personal loan can be quite hard. How can unsecured lenders be confident that you will be able to pay back your loan if you have no history of paying back loans? It can be something of a catch-22, but title lenders do not force you to deal with that burden.
What lenders do check is whether or not you own a vehicle outright and possess a lien-free title on that vehicle.
How much could you get?
The value of a car title loan is tied to the value of your car and the equity you have in that car. If you own a car that is worth $10,000 and own it outright, you can expect to get a loan worth anywhere between $3,000 and $7,000. That’s a lot of cash and can go a very long way in helping you cover your financial needs.
The minimum amount a car can be worth in order to qualify for a car title loan is typically $2,500. This number varies widely by state, however. As you might have gathered from the previous paragraph, you should not expect to get a loan offered that is equal to the total value of your car. In fact, car title loans typically are worth somewhere between 30 percent and 70 percent of the value of the involved car. Another great thing about title loans is that even if you do not own a car, you can use other vehicles that you do own. RVs, motorcycles, boats, and even motorhomes can be used as security in a title loan.
If you are curious about finding the value of your vehicle, it can be as easy as logging into your computer. This is another reason why car title loans can be a great option. While some types of lenders are still stuck in the past, forcing you to come into their brick and mortar storefront just to begin the application process, car title lenders have fully embraced the 21st Century. See more here.
With car title loans, you can begin your application, find out if you have been approved, agree to terms of your loan, and get your money all without leaving your home.
What documents would you need?
So, what are the documents you might need? This is another reason why you should consider taking out a car title loan. The list is incredibly short:
- You must be at least 18 years old
- You must be able to provide a government issued ID.
- There must be no liens on the vehicle you are borrowing against.
- You must own the vehicle outright.
- You must have the original title of the vehicle.
If you are able to provide all of this to a potential lender, you should be good to go when it comes to getting a car title loan. Next, we need to discuss the pros and cons of car title loans.
Pros of auto loans
Another reason why you should consider getting a car title loan is that not only are they easy to get, they are incredibly fast. After you apply for a car title loan, either online or at a store-front office, you can expect to have your cash in hand anywhere between one hour and 24 hours. It can even take less than that if you are prepared with all of your necessary documents.
Cons of auto loans
The final thing that you should be aware of are the drawbacks of car title loans.
Let’s start with something we have already discussed, and that’s the value of your loan compared to the value of your car. The reason why car title loans are worth only 30 percent to 70 percent of your car rather than the whole amount is because lenders need to protect themselves financially in the event that you default on your loan.
A default occurs when you fail to pay your loan on time. At that point, a title loan lender can decide whether or not they want to repossess your car and sell it in order to recoup the losses that came with lending to you. Getting your car repossessed is the worst-case scenario when it comes to title loans, and while you will easily avoid it if you are financially responsible and pay back your loan on time, it is something to keep in mind before taking out a title loan.
The final word
In the end, car title loans that you find online can be a fantastic resource for you if you are looking for fast and easy cash. While paying the loan back is harder, that is true for all loans. All you have to do is be sure that you are responsible and careful enough financially to take out a loan and pay it back in time.