The Basics Of Car Title Loans
Note: The interest rates on car title loans are exorbitant. As such, this type of loan should be an absolute last resort. They are better than payday loans, however. Barely.
Car title loans are short-term loans in which you use your car title as collateral for a loan. In order to get a loan, you must own your car (or truck) free and clear of any debt (that means you upside down car loan people are out of luck). This means you must hold clear title to your car. Once that is established, you can then shop for a title loan.
These loans are typically a 30-day renewable loan. At the end of the month you either have to pay the entire loan amount off, plus interest. If you are unable to pay off the loan amount, at that point you will have to pay all of the accrued interest and then rollover or renew the loan for another 30 days.
Since you are using your car title as collateral, getting the loan should be easy. Because the car is being used as security for the loan, there is no need for the lender to do a credit check or pull your credit report. Since doing a credit check isn’t necessary, you can often times get a loan in less than 1 hour. As long as the car is in good shape, you can get the loan.
Car title loan lenders will loan up to about half the wholesale value of your car. Depending on the lender, they may cap the loan amount at $2500 even if your car is worth more than $5000.
When you get the loan, you will need to give the lender a copy of your car keys. You can certainly still use your car at your pleasure when you get the loan, but the lender will want the keys as extra security for their loan. This is because if you fail to pay the loan and default on it, the lender will then go to repossess your car to recoup the money they loaned you.
Shop around when looking for a car title loan. Interest rates will be the biggest cost with the loan. Also be sure to check for other fees that a lender will try to tack on to your loan.
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