People have different reasons as to why they may need some money in a hurry. Banks are often not forthcoming, particularly if there is a blemish on someone’s credit report. Even if they agree to supply a loan, it usually takes weeks before it is available. So people have to look for other constructions, one of which is the car title loan. This basically means that you are given money that is secured against the pink slip of a vehicle.
About the Car Title Loan
If you own a vehicle in full, then you can use it as collateral to get a loan. This means that, until you have paid the loan back, the lender actually owns your vehicle. However, you can generally keep using it in the meantime. While there is a lot of negative press about these types of loans, they can really benefit people so long as they find a reliable and credible company to deal with.
That said, title loans are risky. If you don’t pay them back, then your vehicle will be repossessed. Hence, if you worry about whether or not you will be able to pay the loan back, it is generally better to simply sell your car. You will get more money for it as well. If, however, you know that you can pay the loan back and you have found a reputable company, then a title loan can be an absolute life saver.
One of the biggest downsides of title loans is that they are attractive to predatory lenders. However, you can protect yourself against this and make sure that you don’t fall victim. Some tips include:
- Only deal with a company that you can actually speak to, and not just deal with online. It is even better if you can visit them.
- While title loans will only give you a percentage of the value of your vehicle, this percentage should be fair. This is because, if you don’t pay it back, the company will take possession of your vehicle and it will become theirs. They should not profit from the sale of your vehicle, in other words. Hence, if you are only offered 10% of its value, then you are dealing with an unfair company. 35% is more common, although there is usually a maximum amount associated with it. Your contract, in that case, should state that, should the company have to repossess your vehicle, you will receive any money that is left after deduction of costs.
- Check on the going interest rates. Because title loans are short term loans and because they are particularly attractive to people with bad credit, they usually have higher interest rates. However, these should not be excessive, particularly compared to other short term lenders for people with bad credit.
You must think carefully before taking out any kind of financial product. That said, if you use good common sense, then a car title loan may just be able to help you out of a difficult financial situation.