There are various types of loans in the world and each of them comes with certain advantages, disadvantages, gains, and risks. The same goes for title loans. They are perfect for anyone who needs quick cash, however, if that person fails to pay them on time, they will lose their vehicle.
Although a lot of people are familiar with all the risks that are involved when it comes to title loans, it still doesn’t prevent them from taking them into consideration. In fact, according to the statistics, almost four percent of consumers applied for them in 2023.
So what makes them so appealing, and how do they work? If you’ve never considered them before, yet you may think that now is a good time to do so, then stay tuned because today, we are going to provide you with some very useful information.
What Can Be Said About Them?
This type of loan is also known as a pink slip loan, and it enables you to borrow up to fifty percent of the value of the vehicle. In these instances, the borrower utilizes their car as collateral (or any other vehicle) to borrow cash from the lender.
As previously stated, they are ideal for people who need money fast. So how do title loan procedures work? Namely, the entire process is relatively straightforward. If you are approved, you will most likely receive the desired amount of money within one day.
At times, this can occur even sooner. When it comes to loan terms, they normally begin at $100 with a repayment period of up to one month. What you need to know is that the loan products have pretty steep interest rates.
There are some states that restrict the amount of money (in terms of interest) lenders are allowed to charge, while there are states in which there aren't any limitations. Keep in mind that some states do not permit car title loans.
That’s why it’s of huge importance to do your homework to see if these types of loans are allowed in the state you live in. If the answer is yes, then don’t forget that you are obligated to have an automobile if you want to acquire a loan.
How Do They Work?
As stated above, the whole process is pretty simple, just like with most loans. For starters, you first must fill out an application with the lender you chose. You must show the lender your car (or any other vehicle that’s in your possession) because that’s your collateral, and along with it, proof that you’re insured, photo identification, and the vehicle’s title.
The amount of money that you can borrow, depends on the value of your auto, and the loan regulations in the state you reside in. A vast majority of lenders will loan you up to fifty percent of your automobile’s value.
Once you’ve been approved, the next step is to give the title to the lender. As soon as the loan term is ended, which is usually within one month, you are obligated to repay the loan, along with the fee in one lump sum.
In some instances, you will need to provide an extra car key, have a GPS tracking device, and, sometimes, sign up for a roadside service plan. Only then you'll be able to close the loan. What's the main reason for all of this?
Namely, this should be perceived as some sort of preventative measure in case a borrower doesn’t repay the loan. If that’s the case, then the lender has every right to repossess their vehicle.
Various Types Of Title Loans
Even though car title loans are certainly the most common type of title loans, there are still different types of vehicles a person can employ as collateral when they apply for title loans and they include these:
- Cars – As concluded previously, these are the most common. Titles of automobiles of all kinds can be utilized as collateral for title loans.
- SUVs – This stands for Sport Utility Vehicle and represents a huge automobile that's intended mostly for off-road and city streets. You can also use them when applying for title loans.
- Trucks – Here's another vehicle that people use when they want to obtain car title loans. They can be found in various sizes and types, and are typically employed to transport different sorts of equipment, supplies, etc. The process for applying for a truck title loan is quite similar to a car title loan.
- RVs - Also known as Recreational Vehicles. They are very big motor vehicles that come with cabins too that are usually utilized as living spaces. Just like the above-mentioned vehicles, these can be employed for title loans as well.
- Motorcycles – There's a common misconception that title loans are intended solely for the four-wheelers, but that's not actually the case. You can also use your motorcycle as collateral to obtain the title loan.
What Do You Need To Apply For This Type Of Loan?
What sets apart title loans from other types of loans is the fact that you do not need a bunch of documentation in order to apply for them. In most cases, all you need to bring is proof of your income, as well as your driver's license.
By doing so, you are going to simplify this whole process. Apart from that, you must also show that you are insured, and showcase proof of a lien-free title. Why do you need to bring all these documents?
Bear in mind that there are lots of fraudsters in this world and that lenders need some form of guarantee that you’re not going to trick them. These documents are going to prove that you are the actual owner of the vehicle and are going to confirm your identity.
One of the best things about car title loans is the fact that you do not need to have a perfect credit score in order to obtain them. A vast majority of lenders couldn't care less about it.
If you urgently need money, yet you have no one to turn to, to borrow it, then the best thing that you can do is to opt for title loans. However, before you take any further steps, make sure to go through this guide first to get your facts straight.
