If you need a financial resource to cover an unexpected expense, a few options are available. While there are plenty of choices for you to pick from, a car title loan may be the best alternative. With secured-based loans like title loans, you would only need to use your car title to initially secure funding. That means the approval process could potentially be convenient and flexible for you to go through.
However, you must know that title loan lenders place themselves as lienholders on your title if you sign the loan agreement. What does that entail?
A lien on an car title loan is simply the loan provider claiming partial ownership of the vehicle title during the loan duration. In the case of title loans, a lender will place a title lien on your title to ensure you will pay off the entire loan amount one way or another. If you start missing payments and fail to pay off a car title loan, the title loan lender can repossess your car and sell it to recoup their losses. It’s important to note that when your vehicle title has a lien, it automatically shows you do not own the car “clear and free.”
Although you will be using your vehicle’s title to secure money, some title loan options can allow responsible borrowers to keep driving their car while they pay off their loans.
How Can I Use a Lien on a Title Loan to Obtain the Cash I Need?
Assuming you’re a car owner, you have an asset that you may be able to use to your advantage if you need money. A borrower could use a truck, car, or other vehicles to secure funding through a title loan.
A lien on an car title loan could help you get the cash you need, even if you aren’t confident with your credit score. The process of acquiring a title loan could be easy and streamlined if you use the collateral. Qualified borrowers can simply sign their loan agreement and get their funds in no time.
Remember, you can keep driving your vehicle during the repayment process until you complete your payments. Once you fully pay off a loan, the lender will remove the lien on your title. Since it is no longer collateral for the loan, the title loan lender will not need the lien anymore. Keep in mind that you would only keep your car if make consistent, on-time payments.
What are the Benefits of Choosing an Car Title Loan?
For many traditional loan options, a borrower’s credit is often the basis for loan approval. Their credit history will let a provider know if they are a risk to lend to, as well as what their loan amount will be. The more positive a borrower’s credit history is, the more they can potentially borrow through an unsecured loan.
However, the inquiry process for a title loan can be different. A lien on a car title will affect how a borrower applies for cash; since title loans are secured loans, a lender will not rely heavily on your credit score for approval. The collateral will assume most of the risk, so the loan process can be more flexible than that of an unsecured loan.
Be aware that collateral-based loans have higher approval rates and can often be a better solution for people who are not confident with their credit histories. While a title loan lender can verify your credit, these two factors will matter the most:
- The Value of Your Collateral
- Your Income and Ability to Pay Off Car Title Loans
The larger your income and the more your vehicle is worth, the more you may be able to borrow through a title loan. Title loans and other secured loan options generally allow for larger funding amounts than an unsecured loan. Also, you may still obtain a title loan even if you’re financing your vehicle. You could use tools like Kelley Blue Book to see how much equity your car has and if it qualifies for a car title loan.
Do you feel confident in getting a title loan? Contact your local title loan lender to find out what you need to get started.