One of the highly coveted loan facilities today, especially on emergency cases are those given against cars as collateral. Many people in need of immediate cash have found car title loans very useful. It has definitely been useful for those looking to get funding for something they want to do or clear off old debts at once.
Even with the ease of getting this type of loan, it is important for everyone to understand what is included in the application of this type of loan. Understanding how they work should be your number one step towards the application of a loan using your car as collateral.
Ideally, a car title loan is a short-term facility that is usually given at a high-interest rate while at the same time using equity on your car as security. With this type of loan application, the process is quite different from a conventional bank application process.
They can easily get acquired more than many other types of loans. At the same time, you are allowed to stay in possession of your car and continue using it as per the agreement. After receiving the loan amount, the lender places a lien on your vehicle where you are required to sign against the agreement terms that show the period of repayment and the interest rate.
Important Things to Note About Car Title Loans
Other than the ease with which a car title loan can be acquired, there are also some other important things to take note of. Knowledge about these types of loans helps the borrowers make the right decision when making application for the same. Here are the main things that you should know about car title loans:
1. Interest Rates
The loan term is usually short between 24 and 48 months. This comes with a high rate of interest, usually a triple-digit percentage rate (APR). Compared to other forms of loans, the interest rates charged here are quite high. These facilities were originally designed for those with poor credit scores hence the high rates of interests. The resale value of your car is usually determined through an evaluation process.
2. Applicable Laws
Different laws apply to car title loans based for different states. Actually, they are not allowed in some states. Therefore, one should establish whether they are allowed in their state. However, where applicable, the legislation on this matter covers issues to do with administrative charges and fees, interest rates and repossession following default by the borrower. It is the responsibility of the lender to provide the law requirements without which you should not get the loan.
3. How they Work
You must be a car owner to access a car title loan. The pink slip or car title will be given to the lender for the issuance of this type of loan. The document provides evidence that you are the owner of the car. The lender gets to see your car and inspects it in an evaluation process that confirms the state of the car. The loan amount is determined after the evaluation process. The lender will then place a lien on the car in exchange for the cash borrowed.
4. Payment Options
The payment plan is based on the policy of the lending company and the resulting negotiation. Some lenders can allow you to pay more in some or all the months to clear the loan early enough while others won’t. Payment options may include via an online direct fund transfer, payment in person or via an automated system, whichever works for you.
5. Roll Overs
If you cannot pay the loan within the specified timeline, you can be allowed to roll it over. However, it is important to take note that the interest rates keep soaring high each time you roll it over. That means you will end up paying much more in the end than it was agreed initially. Also, delay of loan payment affects your Credit Score.
6. Default and Repossession
Should the borrower fail to pay the loan as agreed, the lender can opt to conduct the borrower and discuss efficient remedies to consider or not. When there are no other ways of dealing with this scenario, the only option left is a repossession of your car by the lender. That way, you will lose your car to the lender who can auction it to get the money you were supposed to pay.
Conclusion
Getting a car title loan could be the only option you got should you find yourself in a financial quagmire. They can easily be obtained compared to conventional loans. However, there are important things to consider before taking this option!