The Good, Bad, and Ugly of a Car Title Loan


When people need quick cash, they have several options. First, if possible, money could be borrowed from a family member or friend. Second, an individual could consider pawning valuable items. Third, money from a payday or cash advance loan could be considered. Fourth, a car title loan would provide a great solution in the case of people that have a clear car title.

While each of these solutions works, a car title loan seems to be one of the more preferred methods. In summary, a car title loan is based on lending money to someone that has a clear title and in an amount based on various factors to include geographic location, make and year of the vehicle, and mileage and condition. As long as the loan is paid on time and in full when due, the borrower would have no problem but if not, the loan would go into default, which means the lender has legal right to sell the car as a means of recouping the cost of the investment.

For a person to determine if a car title loan is the right option, it is important for the good, bad, and ugly to be fully understood. For starters, this kind of loan is meant only as a short-term solution. Loans such as these are approved quickly and the applicant provided with the money in 30 minutes to 24 hours depending on the lender. However, because different lenders offer variable interest rates, fees, and terms and conditions, anyone thinking about a car title loan needs to conduct research first. After all, if the loan has extremely high interest, making the payment might prove to be to challenging.

To qualify for a car title loan, applicants are required to provide the lender with certain types of documentation. For instance, the lender needs the physical title, the applicant?s current driver?s license, proof of current residence, which could be taken off a utility bill, proof of steady income, which is typically from a paycheck although a certified letter from the employer might suffice, and proof of being 18 years of age or older.

The greatest benefit of a car title loan is that getting the money is easy and fast. Even with the convenience offered, people need to understand that in exchange for the money, the lender holds onto the title. That means if at any point the loan were to go into default the person is at risk of losing the vehicle. For this reason, anyone considering a car title loan needs to know the seriousness that goes along with the benefits.

One of the challenges associated with a car title loan is that while this type of business has grown significantly in the past few years, being able to gauge the true level of effectiveness is difficult. This is due in part to the fact that while interest rates charged for a car title loan are regulated by the government but the loan itself does not have sound definition or regulation for many states

Now, some states are using the same licensing procedures that go along with a pawn shop business to ensure every car title loan is handled with the highest level of integrity possible. Because of the lack of regulation and rapid growth of the car title business, some financial experts are pushing for formal monitoring. After all, in only three years alone, the number of lenders for a car title loan shot from 21 to 45 for the state of Montana alone. Then, with 16,000 loans being provided in a single year back in 2002, it is easy to see why regulation is so critical, for the safety of borrowers and lenders.

Typically, a car title loan is highly beneficial but borrowers have to understand that sometimes, extra cars are associated with a loan such as this. Unfortunately, some lenders are dishonest, which means they add hidden fees to the loan unbeknownst to the applicant. It is only when the full loan matures that the borrower is hit with a huge payoff fee.

Okay, looking at the good, bad, and ugly aspects of a car title loan, is this a good short-term option? The answer is that in most instances, it is not only beneficial but also secure and safe. However, no person should simply walk into a car title loan office and walk out with money without first conducting research. By using the Internet, an individual can look at brick and mortar, as well as online lenders, finding several to consider. Once a few choices have been identified, the borrower should do even deeper research so the final car lender is chosen.

For someone needing fast and easy money, without hassle, and knowing it would have to be paid back in full in about 15 to 30 days, a car title loan works. Just as with any type of loan, the car title loan is still a legal business transaction, one that needs to be handled with care and taken seriously.