Breaking Down the Basics of Title Loans

Life can oftentimes be very unpredictable, especially when it comes to the financial aspect of it. At times, a lot of people urgently need cash, and when they do not have anyone they can borrow money from, they need to resort to other solutions.

In these instances, one of the best things that you can do is to take title loans into account. These types of loans are also known as car title loans, but you may also come across different terms, like title pledge, pink-slip loan, and title pawn.

If you aren’t sure whether this is the right option for you, then you should cast your eyes on this informative guide, because it’s going to tell you everything you need to know about it. So let’s cover the basics of title loans together!

Let’s Define It First!

This type of loan represents a secured loan that allows you to employ your car (or any other vehicle for that matter) as collateral. Since you’ll be using your vehicle to secure the loan repayment, if, by any chance, you do not repay it on time, the lender has every right to repossess your automobile.

Additionally, they are typically short-term loans, that come with high interest and they only have several requirements (which will be discussed below). Basically, any person who has a vehicle in their possession is eligible to apply for it, however, you need to showcase to the lender that you own a vehicle, the auto title, and the license.

If the lender approves your application, then the next step is to hand over your automobile in exchange for the loan. Title loans normally have terms of one month, which is similar to payday loans.

In a nutshell, you’ll need to make one lump-sum payment before the loan period expires. Furthermore, you are obligated to make payments on the amount of cash you borrowed, along with the fees and interest.

What About The Requirements?

Luckily, everything that revolves around this, is pretty easy to comprehend. So if you’ve been wondering what the requirements for title loans are, then just pay attention to the things that will be enumerated below. In order to apply for it, you need to meet these specific requirements:

• You need to be at least eighteen years old to apply for a title loan
• You need to have a title to a qualifying vehicle in your name. It’s mandatory to be in your name at the time of your application. If by any chance, you must transfer a title to your name, or acquire a duplicate title, then you should go to the local Department of Motor Vehicles. If you are the owner of the vehicle, then you must bring all the necessary paperwork with you and also pay a certain amount of money (for a fee) to get the title in the proper shape so you can move forward with your application.
• You need to prove that you’ll be able to pay off the loan. So how can you demonstrate that? Certainly, one of the surefire ways to do so is to submit proof of income. Now, if you do not get pay stubs from the company you work for, don’t worry. There are many different ways you can prove that you have a stable income. For instance, you can submit settlement income, Supplemental Security Income, Workers’ compensation, Child support, and/or Pension income.

Even though everything that was mentioned above (concerning requirements) may seem a bit too challenging and complex to you, the truth is, that’s only the impression you can have at first glance. The reality is totally different.

The Amount Of Money You Are Allowed To Borrow

The title loan limit can be anywhere, starting from twenty-five percent to fifty percent, depending on the value of the vehicle you are giving as collateral. If you cannot determine the worth of your vehicle, don’t fret. 

The lender is here to do that on your behalf by properly investigating it. What you need to remember is that there are loans that can be extremely loan (around $100), and then, there are those that can be over $10,000.

Are They Risky?

Although there’s no denying that these loans can come in handy whenever you need cash fast, you need to remember (just like with any other types of loans) that they do, in fact, come with certain risks.

Now, this doesn’t mean that you should refrain from them. It just means that you need to be familiar with those that are involved and they include the following:

• They have pretty short repayment terms – They usually last up to thirty days. Sometimes they can be up to sixty days, however, that’s very rare. This means, that to some of you, it’s going to be hard to repay it (along with the financing fees) within that timeframe. If by any chance, you fail to pay it back on time, you’ll need to deal with additional fees and interest.
• Title loans frequently have very high interest rates – Seemingly it may not look that way, however, it’s worth mentioning, that, at times, lenders may charge you up to twenty-five percent of the amount of money you borrowed per month so you can finance your loan. For instance, if you receive a thirty-day title loan for $1,000, and the fee is twenty-five percent, you’d be obligated to pay $1,250, along with the additional fees. Bear in mind that you must pay off your loan by the end of the month. To put it simply, you’ll have an annual percentage rate of over three hundred percent, which is, you must admit, quite a lot!
• You may lose your vehicle – As previously concluded, if you do not repay your loan on time (even after a couple of rollovers), then the lender has every right to repossess the vehicle you gave as collateral and sell it to cover the amount you owe to them.

The reality is that car title loans come with numerous advantages, but drawbacks as well. That’s why before you apply for them, you should first go through this article to see if they are truly the best option for you right now, or not.