When to Use a Car Title Loan


It isn?t all that unusual to run into a financial emergency. Homeowners frequently encounter mandatory repairs that force them to find ways of pulling together the necessary funds. Automobile owners might suddenly run into several thousands of dollars in necessary repairs. People without health insurance may need to pay for procedures or treatments ?out of pocket?. There are all kinds of financial emergencies that require larger sums than most people can quickly acquire, and this where a car title loan can really come to the rescue.

While there are great options for smaller personal loans, such as payday loans and cash advances, for anyone who needs more than the $1,500 to $2,000 usually available through such loans there are really very few choices. A car title loan, however, allows them to use their vehicle as collateral for a significant sum of money. The great thing about such a loan is that it will have no impact on the use or ownership of the vehicle.

When someone uses their car title to secure a personal loan they will retain full ownership and free use of the vehicle, they simply repay the loan and receive the clean title in the mail a few days later. This is one of the easiest ways of securing larger sums without all of the hassles and headaches of a more traditional bank or personal loan.

In fact, for people with no credit or poor credit, a car title loan may be the only way of obtaining a significant amount of money at all. This is because most banks really scrutinize the borrower?s credit score and report, and if there are any questionable or negative issues, they will turn down the application. This is particularly true in the current economic climate when billions of dollars in loans are being defaulted on each week.

Generally, a loan will be available for around 50% of the vehicle?s current value, and most lenders want to only deal with vehicles that are ten years old or younger. This is because the vehicle is being used as collateral against the loan and should the borrower default the lender will have to claim and sell the car to get some of the money back. Most cars that are over a decade old are not going to take in a significant sum when re-sold, and this is the reason for the limitations.

When should someone opt for a car title loan? The answer to such a question really depends upon the borrower?s needs and the lender?s terms. For instance, if an individual owns a home and the heating system fails, they might be looking at around five or six thousand dollars in repairs and replacement fees. They could head to the bank and try to use the equity in their home for a loan, but this will take several weeks to achieve.

They could also pay for the work using their credit cards, but this is something most financial advisors recommend against. Why? Because the vast majority of credit card users do not come close to repaying their balance each month, which means interest piles up on the debt. This interest increases the balance and a consumer can end up taking years to pay off even a small amount.

This same person could use the equity in their pickup truck and take out a car title loan to pay for the repairs. Just like a payday loan or cash advance, a car title loan will have a shorter repayment period which keeps interest in check, and also eliminates the debt in the shortest amount of time possible. Also, unlike credit cards and banks, if a borrower finds it hard to make their payment for a month, they can approach their lender to ask for an extension or adjustment to the repayment schedule.

Clearly, the car title loan is the easiest, most reliable and most flexible borrowing option for almost anyone in possession of a relatively new vehicle.

Are there any risks? The only risk to a borrower is if they fail to repay the loan. This is the exact same scenario as any other type of borrowing, with the exception that the collateral will be collected by the lender. Looking at it from a realistic perspective, a car title loan is very similar to a mortgage because an expensive asset is used to secure the debt. If the borrower does not meet the terms that they agreed to when they took the money, they are at risk for losing the asset altogether. This means that it is no riskier than a mortgage or secured loan.
It is important to note that a car title loan is not an instantaneous process and requires documentation and an assessment of the application. This translates to a few business days before the funds can be provided, and any potential borrower must be prepared to wait the few days for their loan.