If you’re in need of immediate cash, one option you may be considering is a car title loan. This type of loan comes with several advantages and disadvantages that you should be aware of before you apply.
Title loans are among the fastest loan options available, so they’re an excellent choice if you don’t have time to wait around for a lengthy application process. All the title loan company needs to do is perform a simple inspection of your car to verify its value, and then they can issue you the loan. You can typically apply for a car title loan and receive the money on the same day.
The interest rates and fees make title loans one of the more expensive loan options. Even if you need money fast, shop around and compare multiple title loan companies, as some have more fees than others. Remember that if you can’t pay a title loan within the designated repayment period and roll it over, you’re going to end up with more interest charges and fees.
High Approval Rates
It’s not hard to get a car title loan. You just need a car that’s paid in full and in your name, and a steady source of income to get approved. With other types of loans, you would have to bring in a wide range of financial documents, but the application process is much simpler with title loans.
Short Repayment Period
If you’re looking for a long-term loan, then a car title loan definitely isn’t for you. The standard repayment period for a title loan is 30 days, although some title loan companies offer 90-day loans. A car title loan is best if you need money immediately and know that you’ll be able to pay the loan back within a short period of time. When you need a loan that you can gradually pay off over a term of one year or more, you should look elsewhere.
No Credit Check Required
With most loans, if you have bad credit, the lender will either deny your application or only approve you with a sky-high interest rate. There’s no credit check involved with a car title loan, so you don’t have to worry if you have a low score. You can also improve your score by paying off your loan within the designated repayment period.
Risk of Repossession
Any time you put your own property up as collateral on a loan, you’re running the risk of repossession if you can’t repay it. Losing your car can put you in a very difficult situation, which is why it’s crucial that you’re able to pay back the loan.
High Loan Amounts (Depending on Your Car)
If you have a bad credit score, most lenders won’t issue you a large loan (if they’ll issue you a loan at all). That’s not the case with a car title loan, because it depends entirely on the market value of your car. The amount you’ll receive depends on the lender, but lenders usually issue loans up to 40 or 50 percent of a car’s current trade-in value.
The pros and cons of car title loans make it very clear how to best use them – as a short-term solution when you need cash right away. You also need to be confident that you can pay the loan back within the repayment period. If so, title loans are a viable option. If not, consider other loan options better suited to your situation.