Recently, and since the news about the Coronavirus made headlines, things have not been easy for most people. The outbreak saw many people losing their jobs, and it has been a tough time for everyone. Most businesses are left struggling to keep afloat, and it is not any different for the lending industry. Many affected people are searching for ways to get money urgently, and title loans have become one of the most popular means in this category.
What’s a title loan, you may ask. It is a type of loan that you can get when your car or vehicle is used as collateral. Many people have leveraged this option to keep their businesses afloat during tough times.
However, there are things you should grasp in your fingertips before applying for title loans so that they don’t become another reason why you might not be able to meet your financial obligations. Continue reading below to learn more about title loans.
1. Easy accessibility
Nothing is frustrating like walking from one bank to the other searching for a loan. Well, title loans are known for their easy accessibility. Today, there are sites over the internet you can go now that will direct you to the best title loan lender. What these sites do is that they give you a form to fill, and after submitting it, they will connect you with different lenders.
The best thing about this is that the form is simple and only requires your contact info and the make and model of your car. You don’t have to mention what you need the loan for or why you are looking for one. The sites then do all the hard work by screening different lenders on your behalf before recommending.
This makes the process faster and easier because you can compare rates within minutes without leaving home. And if there are any pre-approval questions, most lenders will answer these through email or over the phone so that you know beforehand what to expect when you finally meet them in person.
This means that you don’t necessarily have to leave the comfort of your bed to get a loan. What’s even better is that once your creditor approves the loan, you don’t have to wait days for the money to be processed. You will often have the funds in your account on the same day.
2. Requirements
Most traditional loans will ask for a pay stub, W-i-C, and credit report. You will also need to fill in an application that asks for more personal information. A guarantor should also come with you when applying for a traditional loan.
Some title loans will ask for the same information as traditional loans, but some do not require guarantors or an application process. Often, they will need your car’s title and registration so they can have power of attorney over it until you clear the loan. This means if something were to happen where you couldn’t pay them back on time, their insurance would cover it instead of yours since they now own the vehicle!
Besides, you still get to stay with the car while you’re paying off the loan. So, you don’t have to pause your daily routine that could have been affected by giving out your car to a dealer.
Therefore, as long as you’re 18 years and above and have a valid driver’s license, title loan companies will be happy to help you with your situation. The fantastic thing is that your credit score doesn’t matter as much as the title to your car. Therefore, this makes it a perfect choice for individuals with a poor credit score.
3. Interest rates and cost of title loans
When searching for a loan to cater to your needs, it’s important to compare interest rates and other associated costs. Different lenders may offer additional terms, so it’s important to know what you’re getting into before signing any paperwork.
Title loans typically have higher interest rates than traditional loans. This is because the loan is given based on the value of the vehicle, not the borrower’s credit score. So, if you’re considering a title loan, be sure to factor in the cost of interest when making your decision.
In addition to interest rates, there are often other fees associated with title loans. These can include origination fees, late payment fees, and prepayment penalties. It’s important to read through all the fines before signing any contracts!
4. Risks
Every type of loan has its pros and cons. Now that you already know much about the benefits of title loans, it is also essential to know the risks that come along.
● You may lose your vehicle
Your vehicle works as collateral in a title loan. If you can’t make your payments, then the lender may take back that collateral which is your vehicle.
● Late payments can affect your credit score
You never know what may happen and delay your ability to make a payment on your title loan. If your payments are past due, the lender is allowed to report that delinquency to credit bureaus. This could potentially damage your credit score and make it difficult for you to obtain other forms of financing in the future.
5. Where to use this loan
Unlike other loans, a title loan has no restrictions on its use. You can use the amount given for anything you want, such as car repairs, medical bills, or home improvements. So, wherever you might find yourself stuck and in need of some fast cash, a title loan could be the perfect solution.
Just make sure you’re in a position to repay the loan according to the terms agreed upon, or you may find yourself in even more trouble down the road.
Title loans can be a great way to get money in a hurry, but there are some things you should keep in mind before taking out one of these loans. Make sure you understand the interest rate, the repayment terms, and how the loan will affect your credit score. By understanding these things, you can make an informed decision about whether or not a title loan is a suitable choice for you.
