Title Loans

A title loan is a type of loan where borrowers can use their assets, typically a vehicle title as collateral. To get a title loan, a borrower has to allow a lender to place a lien on their car title. The placement of a lien helps to secure the payment of the debt. Also, a borrower has to surrender the hard copy of their vehicle title, albeit temporarily, in exchange for a loan amount. If you default on the payment of the loan sum, the lender can repossess the car and sell it to recoup the outstanding debt. This is why title loans are a type of secured loan.

Title loans are short-term, and as such, usually carry higher interest rates than other sources of financing. Title loans attract between 25- to 50% of the value of the vehicle being surrendered, depending on the lender. Car title loans require less stringent processes to obtain, which makes them appealing to most potential borrowers.

Things You Should Know Before You Apply for A Car Title Loan

You should be aware of how to get a car title loan without burning your fingers. Knowing the under listed beforehand will help to prepare you for any eventuality and avoid unnecessary pitfalls.

  • Ask about the payment options available to you. This is the first and one of the most important things to know if you are to avoid any dangers. Borrowers should make it a duty to find out about how the lender plans for them to repay the loan. Some lenders would prefer direct payment, while others would rather you settle them from your paycheck. Also, you should inquire about the duration loan.
  • Ask if there are any repayment penalties. Title loans of more than 30 days usually attract an early repayment penalty. Therefore, any attempt to pay off your debts a few months earlier than the agreed time will see you penalized. So, you should ensure to ask for payoff instructions before you proceed.
  • Try as much as possible to understand the application and approval process. Different loan lenders provide various application procedures. While some allow borrowers to complete their registration online, others might need you to verify your identity through either a phone call or text. Also, some lenders would ask to carry out a visual inspection of your vehicle before they release the loan amount.
  • Make sure that the lender has a license to operate in your jurisdiction. The laid down provisions that govern the operations of online car title lenders vary from one state to another. A creditor cannot provide you an online car title loan unless they are registered in your state. Ensure to check the eligibility of your state before you apply for a loan with any lender.

How You Can Repay a Car Title Loan or Get Out of It Altogether

While title loans are quite easy to get into, getting out of them can be expensive if you fail to go about it the right way. The ideal solution to this problem is to pay off your loan by strictly following your terms of the agreement with the lender. If you are unable to pay due to the title lenders dragging their feet just to get you to continue paying interest, then you should consider other options. These may include downgrading to a more modest vehicle to free up funds, replacing the title loan with a different loan, or negotiating with the lender if they are open to negotiations.