Car title loans are loans made against the collateral of a motor vehicle owned by the borrower. A lender holds onto the physical copy of the title for the vehicle until the loan is completely paid off. Car title loans tend to have relatively high interest rates, even though the loan is guaranteed by the value of the vehicle, so they are necessary only for a few specific reasons. Here are 3 main reasons to apply for a car title loan.
1. You need money as soon as possible.
The ability for a car title loan to be processed quickly from application to cash-in-hand is one of the greatest advantages of title loans over traditional bank loans. Title loan companies generally automated some part of the process with a website where you can enter personal information and information about your vehicle, so you can get an instant quote. Once that is done, you make an appointment for a car inspection and can have cash less than 24 hours later.
Sometimes emergencies happen and we need cash right away and are willing to pay a bit of extra interest in order to make it happen. Healthcare and medical bills, tuition, and other bills that we need to pay instantly can pop up out of nowhere and need to be dealt with. Title loans lenders make it as easy and efficient as possible to get cash into their borrowers’ hands.
2. You have no credit, bad credit, or a history of financial mistakes.
Because a title loan is guaranteed by the value of your vehicle, a credit check is usually not necessary for approval. This removes one of the biggest obstacles to obtaining approval for a bank loan. “People who have no credit or bad credit are viewed as risky borrowers by traditional banks and are often rejected right away for any type of loan,” said TitleBucks. On the other hand, those with bad credit or even a bankruptcy or two are almost never rejected for a title loan so long as the vehicle being put up for collateral has some value. This makes title loans an important avenue for loans for those who have made mistakes or have been put in difficult situations in the past.
On top of not needing a credit check, title loan lenders seldom ask personal questions or pry into the reason you need a loan. Once again, the loan is guaranteed by the value of your vehicle, so there is no need for the lender to ask what the loan is for. This is perfect for those of us who would rather not reveal an embarrassing reasons for applying for a loan.
3. You will retain the use of your car during the entirety of the car title loan repayment period.
Even though a title loan is made against the value of your car, a title loan lender will never have possession of your vehicle unless you default on the loan and show absolutely no ability to repay it. While you are still making payments toward your title loan, you will be able to drive your vehicle and use it as a form of transportation any way you wish.
A car is absolutely necessary to maintain our livelihoods in certain areas of the country, and losing it could mean the inability to travel to and from a job or just running everyday errands. Holding onto your vehicle would only make it more difficult for you to repay the loan, so lenders will never want to do so.
Even though these are three very compelling reasons to apply for a title loan, borrowing against the value of your car is still a serious financial decision that requires some planning. Most car title loan lenders will offer an extensive repayment plan for you to review prior to taking your cash. These companies will never trick you into paying hidden fees, but it is your responsibility to know exactly how much you will owe and when. These repayment plans will often also allow you to “rollover” your loans for up to six months, offering a bit of extra flexibility if you need it.