If you are in need of money fast, there is an option that many people don’t know about. It isn’t always the best option for a loan, but if you’re in a bind, it might work for you: car title loans. The process works like this: you find a lender who deals in car title loans, and you’ll need to show the lender your ID, your car, your title and your application. As long as the loan is approved, the lender keeps your car’s title until the loan is repaid.
These loans are very short term, often only meant to last 30 days. If you default on the loan after the 30 days are up, and you are unable to work out a deal with your lender, your car will be repossessed. That’s the dangerous part. You only want to takes a loan like this on if you are absolutely certain you can pay it back on time.
Along with paying back the money from the loan, borrowers are required to pay a fee for the loan, essentially short term interest but at a higher fee. Normally, the fee is 25% of the loan, which is quite steep. If you need more than a few hundred or a thousand dollars, this fee can add up, making it not the best option for a loan, especially if the loan is on a repayment plan longer than a month, as the fees compound monthly. Compared to a standard loan from a bank or credit card company, vehicle title loans can be more trouble than they’re worth if not taken care of quickly.
If you find yourself at the end of the 30 days with no way to repay your lender, you may have the option of extending the loan an additional 30 days. This results in another 25% fee, meaning you already have to pay back 150% percent of what you originally borrowed. From there, if things continue, your car can be repossessed to pay back to loan. And the lender will keep whatever is left over, so don’t expect to get any money back if your car is worth more than the loan!
Because of these dangers, car title loans should be a last resort for those in need of money. Check with your bank or credit union to see if you qualify for a personal loan before making this decision, as well as look into applying for a new credit card. It’s understandable if these options don’t pan out that you might keep looking at car title loans, but just remember the negative aspects of the deal.
So there you have it. These are the basics of car title loans. Do you have any questions or concerns? Share your thoughts with us down below in the comments, and good luck!