Understanding the Terms of a Car Title Loan


A car title loan is a special type of loan that involves using a vehicle as collateral. This secures the loan and minimizes the lending company?s risk. The lending company will give you about 80% of the fair market retail value of the car or truck. You will be responsible for paying the loan back within a 30 day or less time period. Once you pay off the loan, you get the car title back.

Sounds easy, right? Is there anything else you should know about a car title loan? Are there any extras or ?catches? you should be made aware of? Not really. Interest rates are predictably above average, as with any other creditor and financer. The good news is that if you pay the loan off within the 30-day timeframe you don?t have to worry about colossal interest building up. Compare that to a credit card that you have been paying on for a couple of years. There?s a huge difference!

What about the possibility that you could lose your car in a car title loan? This is one of the terms in the contract, though you shouldn?t assume that the lending company is that quick to repossess your only asset. In fact, many lending companies offer a roll over option, which lets you finance the remaining balance. However, since you have to pay interest on this new debt, this is certainly not an optimistic scenario. This emphasizes the important point that a payday car title loan is meant to be a short-term loan, payable by a person?s next paycheck.

How about the lending approval process in a car title loan agreement? Very easy, especially when compared to traditional loans. The lending company will usually not consider credit history a determining factor for loan approval. The company might run your credit in an effort to merely verify the facts you have provided. The company may consider your residential and employment history as relevant, as this is ?good credit? that is not necessarily listed on a credit report but is still very telling about a person?s character.

Even if you are unable to show creditworthiness based on your living history and employment, you may still be able to secure a car title loan based on collateral. When you hand over a clear title to the lending company, you show that you are serious about repaying the loan. Even if you defaulted, the company could sell your car and cover their loss. Meanwhile you are relieved of your debt, so it?s a win-win situation for everyone involved.

Another factor to consider in getting a car title loan is the fast approval time. Whereas traditional lenders make you wait months for a loan, a car title loan company can actually approve your application in just a few hours. You can literally have your cash on hand within one business day. Money transferring is automatic so you don?t have to wait on the mail or on a delivery service. (Remember the old days when you had to wait for money wiring companies to bring you money in a package? ?Everybody needs some money sometimes?everybody needs some cash somehow??)

A car title loan is the best way to ensure that you have money on hand, while still trying to take responsibility for past credit card debt. Even if you can?t qualify for a credit card, even if you don?t want to try to charge another credit card, you can still take advantage of a car title loan. This option will save you from having to borrow money from friends or family. If you manage your finances carefully, you will never have to borrow more money than you can pay back within a month. A car title loan can be used for emergency funds, medical bills, grocery supplies, car payments, rent and business expenses. Remember that you?re not really applying for a traditional loan, not in the truest sense of the word. Rather, you are asking for cash advance.

If you are interested in a car title loan then start by taking easy steps at first. Start by analyzing your credit report. Find out what bills you owe and what past debts you owe. Manage your finances so you can make payment on your current bills. You might also look into debt consolidation if you have several accounts. Then determine how much you need weekly and monthly to maintain your lifestyle. If you are short, then determine how much you would need from the car title loan company and what week you would be capable of paying the debt back. You should also check the interest rates for the company, as some companies may have fairly generous interest rates while others border on predatory lending. It pays to be patient and comprehensive in your searching!