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We live in a world where expected and unexpected expenses can crop up at any time. To be able to tackle these expenses head on, you need to have finances available. When you do not have available funds to take care of your mounting expenses, you’d need to take a loan from lenders and banking institutions.
There are several forms of loans that you can take from financial agencies. One of such loans is called title loans. In this article, we will be specially discussing everything you need to know about title loans and where you can apply for them.
What Are Title Loans?
Title loans are short-term loans that require a collateral to secure the loan. The collateral that will be used will be repossessed by the lender if you fail to meet up with the repayment. Title loans are increasingly popular because you don’t need to have a good credit score before you can apply.
We know how important an impressive credit score is. It shows bankers and lenders that you’re creditworthy to apply for mortgage, car, student loan, or even be gainfully employment. The reverse is often the case if your credit score is not satisfactory. However, title loans are one of the few loans you can apply for without an impressive credit score.
Another reason why title loans are preferred is due to the ease of application. Since an asset will be secured as a collateral, your credit score isn’t necessary. Thus, the application process is smooth and hitch-free. Your payment history isn’t considered during application as well.
How Do Title Loans Work?
If you need cash to take care of expending pending when you’d get your salary or allowance, you meet with a lender and request for a loan. The lender ask for a collateral and you should present one. In most cases, title loans would need a collateral such as a car.
As long as you own your vehicle outright and have a car title, then you can submit it with your application as a collateral. You may be asked to submit your valid driver’s license. The lender isn’t going to take your car. They’d demand for your car title in exchange for the loan while you conduct your business in your car. If you’ve not come complete payment on your car, some lenders may approve your loan and request for your car title.
Title loans typically have a 15 or 30-day validity, which makes it quite similar to payday loans. Thus, you’d have to make a one-time payment including interest at the maturity date. You can also make arrangements with your lender to extend the maturity date if the loan borrowed is relatively high.
How Much Can You Borrow With a Title Loan?
According to the Federal Trade Commission, you can borrow up to 50% of your car’s value when applying for a title loan. The lender physically validates your car’s value before proceeding to grant your loan request. The average loan amount you can borrow is between $100 to $5,000. However, some lenders can grant loans of up to $10,000 and sometimes more, depending on the nature of the collateral.
If you get approved, you’d tender your car title to the lender to keep it pending when you’d repay the loan with interest. If you fail to pay the agreed sum on the maturity date, the lender can repossess your car.
Pros of Title Loans
Title loans come with advantages and disadvantages you should consider before approaching a lender or applying for the loan. We look at the pros below:
- Your credit report isn’t necessary. One of the benefits of title loans is that your credit report isn’t necessary for lender to approve your loan request. Most people are scared of applying for a loan because they believe lenders will check their credit report. And if they find something unsatisfactory, they might decline the request. With title loans, you never have to worry about that.
- No hard checks required. Even if a lender conducts credit checks on your account, it will soft checks. Soft checks do not appear on your credit report or impact your credit score.
- Faster approval. Title loans are typically quicker to approve. They do not need plenty paperwork and the approval time is quicker than typical times.
Cons of Title Loans
The cons of title loans include:
- They are expensive. The interest on title loans are relatively pricey. You can up get up to 25% on borrowed amount plus additional fees. In retrospect, that’s about 300% APR. So, if you borrow $2,000 from a lender to pay at the end of the month with 25% interest, you’d be paying $2,500 to your lender. In some cases, you may be tasked to pay additional fees and charges.
- You can run into debts. Another demerit you need to consider is that you could run into debts if you fail to meet up with the payments on the agreed date. The lender may opt to rollover the loan to the next month with additional fees and charges.
- Your car may be repossessed. If you fail to meet up with repayments, your collateral (in this case, your car) will be repossessed by the lender. It doesn’t matter if you’ve been making partial payments, as long as you fail to meet the agreement, you’d be forced to part with your car.
- Your car may be tracked. This is a rare case, so you may never experience this. If you request for a hefty sum from a lender, they may ask that a GPS tracker be placed on the car. After you’ve completed payments, the tracker will be removed.
- Short repayment dates. Title loans are quite similar to payday loans. With a validity of 15 – 30 days, you may not have enough time to fulfil your end of the bargain. Thus, before proceeding to apply for a title loan, ensure that your payments will arrive when they will.
Final Thoughts
Title loans are short-term loans that you can secure from a lender without carrying out credit checks. It is recommended if you need urgent cash to take care of a pending situation and repay when you salary arrive at the end of the month.
Bunny Lender is your one-stop destination to be linked with certified lenders across the country. You can select from a long list of lenders in your city, discuss terms with them and get approved for a loan within days.
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