Sometimes, we face financial constraints and applying for a loan to cover unexpected expenses seems to be the only logical solution. With a poor credit score, it may be hard for you to get a conventional loan. A title loan can help out. Before you make this decision; however, you have to weigh the pros against cons so that you can determine if it the best action to take. We will simplify the process by looking at both sides.
A title loan is a short term secured loan that uses your car as collateral. For you to qualify for this loan, you have to own the title to a car. This means that you should not have an existing loan on the car. You have to give the lender the title as well as a copy of the car keys until you pay off the title loan. The repayment period of this type of loan depends on the lender. While some give you a few weeks to pay it off, others offer a year. The car must also have equity that is double the amount you need.
A title loan is advantageous in that anyone can qualify for it as long as they own a car. Since you use the car as collateral, the lender does not have to check your credit to determine if you are eligible for the loan or not. The application process is also fast. Unlike loans that take weeks or months to get approved, you can receive this loan within 24 hours of application.
The value of the car determines how much money you can borrow. Though you have to give the title to the lender, you still have the freedom to continue driving your car. The lender can, however, purchase extra insurance if they are not comfortable with the current policy. Despite these merits, you should understand the drawbacks of title loans before applying.
Title loans often come with high interest rates. Depending on the lender you choose, you could end up paying high rates just like in the case of a payday loan. That is why you should first shop around for you to get a lender with reasonable interest rates to avoid sinking into debt. You should also try to comprehend all the terms attached to the loan. According to the law, a title loan company should disclose all the rates, fees, and issues that come with the loan to customers before approving.
Beware of the danger of losing your car. Lenders sometimes repossess cars of title loan defaulters. The amount that you receive is far less than the value of your car. This means that the lender can make a good profit if they sold your car after defaulting. Put this into consideration before signing up for a title loan. Try looking for alternative ways to get cash even if it means selling some few things. As you evaluate your options, ask yourself if you truly need the loan then make the right decision based on that.