Do you need fast cash? If so, you should consider using your automobile as collateral on a short-term loan. These loans involve the lender placing a lien on your automobile’s title, which will provide the lien holder with legal recourse including the repossession of your automobile if you fail to make your payments. Car title loans offer a number of advantages as well as several disadvantages for borrowers.
What Advantages Do Car Title Loans Offer?
Car title loan are unlike other kinds of financing and do not require a lengthy or complicated approval process. Because you are providing the title of your automobile for the loan, these types of loans are easier to qualify for even if you have a fair to poor credit rating. In fact, many lenders do not even check your credit report or credit score for these types of loans. As long as you can prove that you have a reliable income source and the automobile is valued at more than the loan amount requested, you will typically be approved.
Automobile loans are the perfect solution for those who need fast cash. As soon as the loan terms are agreed upon, you will be able to access your money quickly. Most of the time, you will actually receive your money on the same day that you have applied for your title loan.
According to Netlender, who provide Car Title Loans in California, the lender will place a lien on your automobile; however, you will still be able to continue using your automobile the way you did before applying for the loan. The only way that you can lose your vehicle is that you do not make your payments. If this occurs, the lender will repossess your car.
What Are the Disadvantages of Car Title Loans?
Car title loans typically have high interest rates. These rates may even be higher than a credit card. And, in some cases, these loan’s interest rates can exceed 100 percent. There are a few states that prohibit these high interest rates; however, many states do allow these interest rates. Car title loans are short-term loans. This means that they will need to be repaid quickly. If you cannot make your payments, late fees will be charged. If you are unable to make your payments, the lender can repossess your vehicle, which can lead to a number of other issue.
Tips for Borrowers
Due to high interest rates, car title loans should be considered carefully. Before you take out this type of loan, you should look at other financing options. Loans from friends or family members, credit card advances and consumer loans should also be considered.
If you decide that a car title loan is the right answer for you, read the contract carefully to ensure you understand its terms. Ask about any fees like prepayment penalties, the APR and any other type of fees associated with this type of loan. Even if you lose your car due to nonpayment, you may still be responsible for these and other fees.