Now, here’s a type of loan that isn’t as widely known as some other types of loans. It’s called a car title loan and is a perfect solution for everybody who urgently needs a certain amount of money to pay an expense that appeared unexpectedly.
Although all of this may seem like an amazing idea, it doesn’t mean that it doesn’t come with specific consequences (just like with any type of loan) if you do not repay it on time. So what happens then?
In these instances, there’s a chance you may even lose your car. But before we even further scare you with the negative sides of it, let’s first get you familiar with it, and who knows, you may even consider it in the future.
So What More Can Be Said About A Car Title Loan?
When it comes to the car loan, you give the lender the title to your automobile. These sorts of loans are intended for loans that do not last more than thirty days. As a borrower, you are obligated to repay the lender not only the amount of cash you borrowed, but also interest, and any other extra fees.
Once you repay everything (this refers to the finance fees and all other fees), you will get the title back. Even though title loans are usually used for autos, they can be employed for motorcycles, SUVs, and other sorts of vehicles as well.
So how much money can you borrow and where can you obtain them? Nowadays, you can hunt down quick title loans online, but be sure to do your homework first in order to find the best possible lender. As far as the amount of money is concerned, you can borrow up to fifty percent of the value of the vehicle that will serve as collateral.
In addition, these types of loans usually have high-interest rates and fees. One of the best examples of this was given by the Federal Trade Commission. Here’s how it goes:
- You will borrow $1,000 for one month
- Once that happens, the lender is going to charge you a finance fee of twenty-five percent for that one month, which means an annual percentage rate of approximately three hundred percent.
- Once that month is over, you are forced to pay the lender $250, along with any extra fees.
Aside from all of this, you must keep in mind that there’s a chance that the lender may charge you loan origination fees, along with documentation fees, and may demand to purchase a roadside assistance plan too.
Does A Title Loan Impact Your Credit Score?
Sometimes this can happen, however, in most instances, that’s not the case, meaning that this loan is not going to affect your credit score. How come? Well, that’s because a vast majority of title lenders do not have a tendency to run a credit check on a borrower who decides to apply for it.
Even if that occurs, the check (also known as hard inquiry) is not going to drastically change the situation as far as your credit score is concerned. You will most likely lose five points or even less of your credit score. What’s good about it is the fact that it isn’t anything permanent.
So what happens if by any chance you to know repay your loan? In these types of situations, the lender is obligated to comply with the Fair Debt Collection Practices Act. In most cases, he or she is going to take your vehicle and sell it, meaning that they are not going to sell the debt or report this issue.
Another thing that’s worth mentioning is the fact that your lender is not going to report any of your payments to the credit bureau, meaning that even if you pay everything on time, it’s not going to positively influence your credit score.
Therefore, if one of the main reasons why you want to opt for a title loan is because you want to make some positive changes regarding your credit score, then it’s better to take another option into account.
What Are The Advantages Of Title Loans?
Just like with anything else, title loans come with both positive and negative sides, however, today, we will focus on the positive aspects of these loans and they include the following:
- Easy qualification – as previously stated, even if your credit score isn’t currently good, you can still apply for this loan and get approved. The only thing that matters in these instances is that you have solid equity, hold your vehicle title, and earn enough money to meet the demands and requirements of a specific lender.
- Everything occurs fast – since you do not need to go through a credit check (which can frequently be very time-consuming), you will not need to wait for too long to get approved and receive money.
- You’ll get the cash fast – if you meet the aforementioned requirements, then you can get the money in a flash.
Are There Any Alternatives?
If none of this works for you, then of course, you can always opt for other options, and below we’ll discuss a few. For instance, you can choose payday loans, which are ideal for people who do not want to borrow large amounts of money.
They are provided by federal credit unions, and are in fact, similar to title loans. The biggest difference between these two is the fact that there’s no collateral with payday loans. They generally have very good repayment terms, meaning that the monthly payments are not very high and that you can pay them over the course of several months.
Another thing that you can consider is a personal loan that you can get from an online lender, a bank, or a credit union. What’s great about it is the fact that you can utilize it for literally anything, and lots of them offer money disbursement the same day you’re approved.
Although there’s no doubt that a car title loan is an excellent solution for anybody who needs money fast, it still doesn’t mean that you shouldn’t get your facts straight before you decide to apply for it.
