In the United States, a motor vehicle title loan, also known as a vehicle or vehicle title loan, pink slip loan or just title loan, is a form of secured loan the spot that the borrower are able to use their vehicle title as collateral. Borrowers who get title loans must allow a lender to position a lien on the car title, and temporarily surrender hard copy with their vehicle title as a sub for credit.
When the loan is repaid, the lien is taken away and also the car title is returned to its owner. If the borrower defaults for their payments then a lender is liable to repossess your vehicle and then sell it to pay back the borrowers’ outstanding debt.
Average Loan Length, Terms & Conditions Compared!
These loans can be short-term, and often carry higher rates than other types of credit. Lenders typically don’t examine the credit ranking of borrowers because of these loans and simply look at the value and condition of your vehicle that’s being employed to secure it.
Despite the secured nature from the loan, lenders debate that the comparatively excessive charges they charge should be made. As evidence due to this, they examine the raised chance of default on the type of home loan which is used almost exclusively by borrowers who will be already experiencing financial hardships.
How Long Does It Take To Get A Title Loan?
Most title loans can be obtained in fifteen minutes or less on loan amounts as few as $100. Most other banking institutions won’t loan under $1,000 to someone without credit when they deem these not profitable and too risky.
In addition to verifying the borrower’s collateral, many financiers verify that this borrower must be used or has some method of obtaining regular income. The lenders don’t generally look at the borrower’s credit rating.
Who Qualifies For These Types of Loans?
Because this type of loan is based on equity you’ve built up in your car, with most title loan companies, you will be required to own your car outright. If you still owe money on your car loan, your car’s title is still in the hands of the bank, so you can’t use it as collateral for a loan. Other requirements may include a minimum age, proof of your residence and proof of your income.
Read the Large and Fine Print ALWAYS!
Driving your car to the title company to expediently get the money you need may seem simple enough, but before you give this loan the green light, you need to know what you are legally committing yourself to. Look for the following information within your contract: How interest is calculated and the time period for which the interest rate is calculated. For instance, a 3% interest rate may seem OK until you read on and see that it’s 3% per month, which is equivalent to 36% per year.
What are the mitigation rules?
Are you required to go through mediation, or can you take the loan company to court if it becomes necessary down the road?
Alternatives to Car Title Loans
As with any loan, it’s important to evaluate what other alternatives you may have for acquiring the money you need. Compare the interest rates and penalties of other loan options that might be available to you.
If you need money in a pinch, make sure you compare the rate on your credit cards with that of a car title loan. If your credit card doesn’t have a high enough limit to cover the money you need, call your credit card company and ask for a higher limit. The better your payment history is with them, the better chance you have of the credit limit increase. You’ll still want to make sure to compare the rate, which should be lower than borrowing with a car title loan. (To learn how to evaluate credit card interest rates, read Understanding Credit Card Interest.)
Emergency loans from work
Your company might have an emergency loan program available to help employees with short-term financial binds. Programs vary from employer to employer, but the loan may be interest-free or have a low interest rate set by your employer. Repayment terms also vary. Contact someone in your company’s human resources department to see if this is a service available to you.
If you are thinking about borrowing money because of an emergency situation, such as needing money to pay your utility bill or rent, find out if the payee (your utility company or landlord) will give you a payment extension. A 30-day payment extension on your utility bill or a five-day extension on your rent could save you from spending hefty interest on a car title loan. If you do receive permission to pay your rent late (payment extension), make sure you get the rent extension in writing so you don’t go to work one day and come home to find the locks removed.
And, be sure to ask your apartment’s management company what your late fees will be, so you can carefully weigh your options.Personal loan from your bank: Banks offer personal loans with interest rates that are lower than car title loans, but might not be better than your credit card rates. The benefit of a personal loan with a bank is that you can discipline yourself to pay it back in a set time frame because there are a set number of months in which you have to pay back your loan.
Payday loans: Although payday loans can also charge high interest rates, you won’t lose your car if you break your contract through late or non-payment. Pawning other Valuables: If you plan to get a loan or sell a valuable asset to get the money you need in a hurry, it might as well be an asset that you can afford to risk, such as a guitar you don’t play anymore or jewelry you never wear.