When banks and credit car companies aren’t a viable choice for financing the purchase of a vehicle, there’s another lending option — Car title loans.
Simply defined, a car title loan is a short-term loan in which the borrower’s car title is used as collateral. The borrower must be the lien holder (i.e. own the car outright).
Loans are usually for less than 30 days. If the loan is not repaid, the lender can take ownership of the car and sell it to recoup the loan amount.
A good-quality short-term loan comes with an affordable monthly payment and shows a light at the end of the tunnel: a reasonable repayment period that allows the borrower to get out of the debt.
Lending firms offering car title loans are more lenient than banks or credit card companies because of the nature of the loan they are offering. These types of loans are primarily acquired with the use of a car.
The borrower is required to to the title of his or her car to get the money he or she needs from the lender. It is not the car itself which needs to be given to the lender but the car title or the certificate of title. Thus, a car title loan is a form of secured loans.
Car title loans can also be secured quickly, with borrowers often getting near instant approval. But just like securing a loan from a bank, car buyers considering utilizing a car title loan option, should be mindful.
Here are some of the steps you need to consider before applying for car title loans:
1. Ask around. If you are new to this type of loan, you can ask the people around you—from your family to your relatives to your friends—if they have come across the lender or have tried borrowing money from them.
2. List the available lenders and consider the pros and cons of each company.
3. Diligently research and confirm the information about the companies you’re considering with your local or state government. Confirm the company you’re consider has the appropriate license.
4. Carefully consider the pros and cons of each potential car time loan company. What exactly does each potential company you’re considering give your business offer its customers? What are flexible payment options? What’s is the interest race? What company has the quickest loan approval?