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Car title loans are nothing new, but it seems that their popularity is on the rise. Title loans can be really helpful and a speedy solution for some much-needed cash. At the same time, title loans are not the optimal solution for everyone and every situation. That is why we’ve made this mini-guide with the pros and cons of using title loans.
By the end of this article, you will not only be able to comprehend all about car title loans,but you will also find when title car loans aren’t your best option. We will also talk about how to find the best title loans, and when it is for the best to look for financial solutions elsewhere.
Before we get into the pros and cons of car title loans, we first need to explain what they are.
Car title loans (also known as automobile title loans) are a type of short terms money loans in which the borrower’s car is signed as collateral. If the borrower fails to pay out the loan, the lender can repossess the car. But if the borrower pays off the loan on time, the car stays in his possession.
Typically, these are short-term loans that are easy to obtain and come with a rather high-interest rate. How big or small the borrowed amount is something that the borrowers determine on their own.
Usually, they allow you to borrow an amount, which is 30% to 50% of the vehicle's current valuation. In case your vehicle's current market value is $5,000, then you can expect at least $1,500 as the loan amount. The interest rate is usually 36% to 100%, and they allow you to borrow money for 15-30 days. So for a month, the interest amount is $540. Along with the interest amount, you also need to pay some fees, which varies from state to state.
Usually, you can get a loan if there are no debts on the vehicle. You just need to present the documents of the car, and you walk out with money. In case there are two owners of the car, the company may ask the other person for approval of the loan.
There are moments when one needs the money instantly, there is no one there to help you out, and the clock is ticking mercilessly. In those cases, your best bet for fast cash is car title loans online. The entire process can be completed within ten or fifteen minutes, and the money will be on your account soon after.
Simply fill out the form and wait for the administrator to greenlight your auto title loan application. Sometimes the money is deposited within the first two hours, while other times within the same day.
Yes, you read it right. Automobile title loans are open even for people with poor credit card history. Most borrowers and financial institutions that deal with auto title loans will not care about credit card history. The main criterion is whether you have a vehicle on your name and whether that holds a specific value. After all, you can't expect to get a loan if you just have a 20 years old Honda in a miserable condition.
One of the best parts about title loans is that you can apply from basically anywhere. All one needs is a device that connects to the internet and can run a browser. If you get that covered, you only need a couple of minutes of your time to complete the application. That’s one of the several reasons why online title loans have grown so popular.
In case you don’t know any online title loans service, open up your favorite search engine and type “car title loans completely online.” A query like “car title loans completely online” will introduce you to many online companies that deal with this type of loan.
Just because the car is signed up as collateral for your title loan it doesn’t mean you cannot drive it. That is even not mentioned in your contract with your lender. You can keep on driving your car as long as you honor your part of the deal. Usually, that means simply paying your loan or rates on time and as per the agreed conditions.
Having a car as collateral gives the borrowers a layer of protection. They don’t have that with cash advances. As a result, the interest rates are lower. Therefore, when faced with the two choices, the car title loan is always the cheaper one.
That is the single biggest risk of defaulting on your auto title loan. If you fail to meet your part of the deal, they will come for your car. They will repossess it and sell it to get their money back. It won’t even matter if the car is worth much more than the loan. On the other hand, if you are sure you can return the loan on time as per the agreement, then there isn’t much to worry about.
Both fees and interest rates are on the high end. Not higher than cash advance fees and interest rates, but higher than classic bank loans.
Rarely, but sometimes it happens that the value of the car doesn’t cover the entire debt. In that case, the borrower reserves the right to pursue the rest of the loan. It is not a common case, but it is a possibility.
Let's assume you borrow $2000 from a lender or organization, and you are not able to pay back them on time. Now, the lender asks you to roll over or renew the loan. This loan will add the amount you couldn't previously and more fees.
Considering you borrowed $2000 with a 30% interest for a month, you were supposed to pay back $2600. However, you were only able to pay $600. If you agree to roll over the loan, the $2000 you owe will be added with new fees and interest.
After a month, if you were able to pay $2600, then you ended up paying $1200 more as you borrowed $2000 for two months. Apart from that, the fees are not included in that. Unfortunately, in most cases, the borrowers end up paying more fees and interest than the actual amount they borrowed.
The cost piles up each month, and the borrowers have no other option than giving away their beloved car or turning to another loan option, which ends up in another challenge.
Once we have learned what the pros and cons of a car title loan are, it is time to turn toward something else - how to find the best title loans. That way, you can get the best possible terms and rates.
Searching for best title loans starts as most things today - online. But don’t make queries like easy title loans or cheap title loans. They will only lead you to borrowers that advertise their loans as the cheapest ones, while they have hidden fees that come out once you sign the loan agreement.
Instead, go with a classic search - car title loan services near me. That will reveal all the local companies that deal with this type of loan. That way, you can make a list of all the local borrowers. You can use this list to rank the local borrowers, from best to worst.
Next comes the most challenging part. At this stage, you need to rank the local borrowers based on some criteria. You need to follow a list of criteria that will make the selection a breeze. Simply stick to them, and you won't have to worry whether there are any better title loans out there.
As most things online, car title loan services are subject to user reviews. They might like it or not, but people will talk about their services, write about them, and award stars for their services.
A constant flow of positive reviews is a trait that speaks volumes about a company. The better the reviews, the higher their ranking should be. This should be the first and most important criterion.
Both fees and interest rates can vary a lot from one to another company. Therefore, start from the top and write down the fees and interest rates for each company. This is the second most important thing. The lower their fees and interests, the higher they need to be on your list. As a result, your list might endure some shuffling at the top.
Same as fees and interest rates, companies have their terms and conditions that are unique to them. Some of them have more restrictive terms and conditions than others. That is why it's essential to see and identify the ones whose terms and conditions are not too restrictive.
An excellent online site, which is easy to navigate, neat and clean design, mobile-friendly, and serves all the information, tells you that you are looking at a decent company. It is also a sign that they’ve invested in their online platform, and they want to provide the best possible user experience.
The best ones also have websites that are device responsive. That means is whether you are using a tablet, a PC, a laptop, or a smartphone, their website will be easily accessible.
On the other hand, if a website looks like it’s from the 90s, then you better think twice about why it is so. They might not be making enough money and can’t afford a new, better website.
Some of the best companies that are in the title loans business have been part of it for many years. To be ten or more years in this very competitive business is no easy thing. It says a lot about the company's commitment to providing excellent services. That should also influence how you rank the companies on your list.
Another trait of great companies is that they offer excellent customer support. This well might be the final step before deciding which company works for you best. To that end, reach out to their people, ask them questions about their title loans, and evaluate their response. The best ones will be fast, very polite, and will answer all of your questions with ease.
The internet is truly an ocean where anything can happen. There is a prettygood chance that some of the online companies you are considering are nothing but scammers. If you want to avoid a scam, here are a few signs that reveal their true nature:
The most important thing when dealing with title loans is to be sure that you can return the loan on time. The second most important thing is not to pay excessive fees and interest rates.
To that end, we’ve explained how to choosea good title loan company. One that will give you the best terms and conditions that is not too restrictive and has the lowest fees. Stick to what we have presented here, and there is a pretty good chance you will do just fine with your title loan.