Get Ready Cash with a Car Title Loan

Need some extra cash to carry you through a rough patch? Looking for a way to deal with an emergency expense? Run out of money before you run out of month? The answer to your financial emergency may be sitting in your garage. A car title loan can put the equity you have in your car to work for you and let you keep your car at the same time.

A car title loan, also called a pink slip loan, is a loan against the value of your car. If your car is paid for, or almost paid for, you might be eligible to borrow up to 50 percent of the value of your car. To apply, you need to have clear title to your vehicle, have car insurance, be employed, and be over 18 years of age. You will have to show the lender that you have the income to repay the loan in the timeframe specified in the loan. You will often have to give the lender a set of keys to the car as well, just in case they have to repossess the car.

Car title loans are usually short-term loans with a term of 30 days. You can apply online and often have the money in your bank account or a check in your hands within hours. However, you must sign a lien allowing the lender to repossess your car if you fail to make the payment that is usually a single balloon payment for the full amount of the loan plus interest and fees. In a sense, a car title loan is like a second mortgage on your car. If you fail to make the payment, the lien holder can claim your property, in this case your car.

Still, if you have the income to repay the loan, a car title loan can be a viable way to get some needed cash in a hurry. Just fill out an online application, verify that information when the lender contacts you, and collect the money.

Interest rates on car title loans vary and are affected by your credit score, debt-to-income ratio, and the value of your car. Many lenders require that the car be less than 10 years old, be in good running condition, and have no major body damage. The interest rate can be anywhere from 3 percent on up. Remember that this is not an annual percentage rate and plan accordingly. In some states, car title loans have a maximum APR of 36 percent. In others there are no limits. Make sure you know the laws in your state.

There are also many fees that lenders sometimes tack onto the loan that can raise your payments. Make sure everything is spelled out in advance and get a complete accounting of interest and fees in writing before you sign over your title.

Once you have signed the loan, you are responsible for paying it in full within the allotted time. Since this is normally a month, it will take careful budgeting. In most cases, there is a three-day grace period for repayment after which time you will be charged late fees. For this reason, it is important to contact the lender to renegotiate the loan if you are not going to be able to pay the loan off in time. Just remember that rolling over the loan means new interest fees and may also result in a higher interest rate. Repeatedly flipping a car title loan (rolling it over several times) can result in you owing considerably more than the car is worth. On the plus side, most car title loans have no prepayment penalties so you can save on the interest by paying the loan off early.

Should you fail to make the payments on a car title loan, and find yourself in default, the lender has the right to take your car and sell it. Even if they sell it for more than you owe, they get to keep the profit, not you. For this reason, you should be sure that you get all the facts before you get the loan.

If you have the income, and you are able to make a plan for repayment and stick to it, a car title loan can be a valuable tool in your financial toolkit. If you don?t have the discipline to repay the loan in a timely manner, you might want to consider other options.

Car title loans can help bail you out of a temporary emergency by allowing you to leverage the equity in your car. Just make sure you go in with your eyes open and get all the facts up front before you sign.