There are numerous types of secure loans and title loans are one of them. Secured loans unlike personal or payday loans require the borrower(s) to present a collateral as the security for that loan. A collateral can be anything like landed or physical property or other valuable assets owned by the borrower(s).
In general, the value of the assets to be used as collateral needs to be at least the same as the loan amount. Sometimes, it must be higher significantly. Most lenders or banks do this so as to minimize their risks. This is in case they have to use the properties to repay your loan. They would be at loss if the value is not up to your loan amount.
Things to Know and How Car Title Loans Work
Title loans are also referred to as car title loans since they are a type of secured loans where you use your vehicle as collateral.
They are called title loans because the title of your vehicle is what is needed as collateral. This gives the lender ownership of the vehicle.
The title of your vehicle is the certificate of your vehicle that proves you have full legal ownership.
Auto title loans have high interest rates and are usually short term.
Before you can get an auto title loan, you need to do the following:
Confirm the Legality of Title Loans in your Area
You first need to make sure title loans are backed by the right laws of your state before you get involved. The legality makes it easy for you to take legal actions against a lender if your rights or agreements are infringed.
On the other hand, if it is not a legal activity, you will not have a court backing. You can be easily defrauded that way.
Find a suitable car title loan company
It is not all lenders or banks that offer car title loans, so you will have to find one from your state or city that does.
A few things to consider when making this decision is to find a trustworthy lender and compare rates. Also, make sure their loan range covers the amount you want to request.
You may want to consider proximity to your zip code but I do not find that necessary. Albeit, your zip code has an effect on rates and maximum loan amount eligible for.
To find a few car title loan companies in your city or state, click the colored texts and search for car title + your state or city or county.
Read their Agreement Judiciously
Before you finally decide to work with a lender, make sure you have read and understood their terms and conditions, rates, and agreements very well. Some title loan lenders have repossession laws which gives them the power to take full control of your vehicle. If you default in the loan repayments without prior notice, your vehicle is gone.
If your car is repossessed by money lenders, they can sell it immediately. And by law, you will have nothing to do about!
Do a Personal Valuation of Your Vehicle
You don’t want to be caught off-guard when the lenders start to determine the value of your car. So, know an estimate beforehand. If you know the value, then you will know the maximum loan amount you can get. This can go as high as 40 to 50 percent of the real value of the car. Banks do this so they can have a favorable collateral coverage ratio.
Most of the times, it does not matter what the value of your car is especially is, especially if you are borrowing a less than $2000.
To do this valuation, you can use the Edmunds’ car appraisal tool or KBB’s My Car’s Value. Note that the values you see there are estimated and may not be what your lender will value your car as.
Fill the Title Loan Application
Once you have decided which company you would work with, the next thing is to do is to apply for the loan. This can be done either online or at their office. You will have to exchange the title of your car, lorry or truck with the lender as collateral. You will have to convey it through post or physical handover, and then get your approved loan.
Who should get a Car Title Loan
Even though a loan is a financial assistance anyone in a tight position should consider, car title loans are not for everybody. Before you take this financial rescue, make sure of the following;
Need a Fast Loan
The processes involved in securing a car title loan is very short. So it is a very reliable escape from being financially handicapped very swiftly.
It does not require background check or credit checks. Especially when it comes with repossession laws since you are giving the title of your vehicle to the lender(s).
Have a Personal Vehicle
You cannot use a third party’s car or a vehicle co-owned by you and others to secure an auto title loan. This may only happen if all the owners of the vehicle are getting the loan together.
Also, it is more advisable that when you want to get a car title loan, you should have another. Do not use the best (most valuable) one as the collateral. This is because in case of any unforeseen circumstances leading to default in loan repayment. You could lose your car permanently.
Bad Credit Score
Bad credit scores prevent you from getting loans and better since it makes you an offender who evades loan repayments. But in the case of title loans, your credit score is not a requirement, what matters is your collateral.
Cannot Secure an Unsecured Payday Loan
Payday loans safer than car title loans because they are unsecured. Even with bad credits, there are lenders that give bad credit loans to borrowers without collateral.
Albeit, the rates for both types of loan are very high, you can be rest assured you may not lose any property from payday loans.
Thus, it is wise to make car title loans the last resort only, when payday loans are unreachable. Keep in mind that if you default, the loan amount is not up to 50% of your vehicle’s worth, but you can lose the property.
Some Car Title Loans in the United States
Legality is not available to car title loans in some states in American. But some states have regulated the laws to allow only lenders who play by the rules to operated legally. Some of these lenders are mentioned below.
LoanMart Loans
LoanMart is one of the most popular lenders in the United States. They give out car title loans in Arkansas, Arizona, California, Texas, Georgia, etc through ChoiceCash at an APR of 60% and above. The loans are pre-approved and you don’t need a good credit score to qualify for one.
However, you must have the ability to pay and possession of your car title.
Montana Capital Title Loans
Montana Capital is a loan company based in California. However, its operations spread through many cities in the US. It offers loans to customers through many lending partners and the rates start at a high 60% APR.
Conclusion
Car title loans are a very easy way to get cash that require zero credit checks. They can save you from financial wrecks as long as you have a car to your name. However, if you are trying to build or improve your credit score, auto car title loans are not for you – they don’t have a good or bad effect on it.
