Life does not stop for anyone. Occasionally, money emergencies come up. It could be a medical issue or job loss. There are some options available for individuals in that predicament. Personal loans and credit cards can help in a pinch. However, for those whose credit needs some work, taking out a car title loan may be an option.
Purpose of Car Title Loans
For individuals who need money, they can use their vehicle as collateral. This type of secured loan is called a title loan. These loans are meant to be short-term and have high-interest rates. Now loan also offers this type of loan in the UK for people with bad credit.
A person that has low credit may decide to take out a title loan because it has very few requirements. Credit scores are not usually considered when approving a title loan. If a person does not pay their loan in a timely manner, they can have their car repossessed.
The Car Title Loan Process
An individual can apply for a title loan provided that they own their vehicle outright and the car title has no liens. While submitting the application, the car needs to be inspected by the lender. The lender will also need to see the car title for proof of ownership as well as the driver’s license.
Once the loan is approved, the car title will be given to the lender. Most title loans, like payday loans, usually have a 30-day term. Once the loan period has ended, a lump-sum payment needs to be paid by the borrower. The lump-sum includes interest and fees. On average, lenders charge a fee of 25% per month.
Not paying the loan on time can lead to the borrower losing their car. A person that is considering a title loan wants to make sure they are able to pay off the loan in a timely manner so as not to lose their vehicle.
Example of a Car Title Loan
Usually, when a person considers getting a car title loan it is because of a change in finances. For example, Ricky has been fired from his job, and he needs money to cover his expenses for the month.
He may decide to borrow against his car with a car title loan. The car is worth $4,000. So, the lender grants a loan of $2,000. Ricky has to provide documentation like the car title. As for the interest rate, Ricky assumes the 20% monthly interest rate is annualized.
At the end of the 30 days, Ricky is supposed to pay $2,400. However, he only anticipated paying $2,034. Unable to find the difference to complete the payment, Ricky loses the title of his car.
Title Loan Amount
The title loan limit can be between 25% and 50% of the car’s value. The lender will need to examine the car to figure out the worth of the vehicle. Loans can be anywhere from $100 to a few thousand dollars.
Title Loan Alternatives
There are some alternatives to a car title loan. Federal credit unions offer payday alternative loans. These loans are unsecured. However, the loan amount is smaller than a car title loan. The good thing is it is possible to make monthly payments that are affordable. For individuals considering this route, they will have to be part of a credit union to be eligible for a payday alternative loan.
Personal loans are also unsecured loans that are offered by a lender like a bank. The interest rate tends to be lower than a title loan. The repayment period can range from two to seven years. Although poor credit can make it difficult to get this loan, it is possible to get a cosigner.
Getting a credit card requires paying the balance every 30 days. Paying off the card every month means taking out an interest-free loan. Balances that are unpaid at the end of the month accrue interest. The interest rate, though, is lower than title loans.
Asking friends and family for money can be a great way to avoid taking out a loan. They are flexible in coming up with a repayment schedule. Their terms on interest may also be less compared to other loan options.
The Wrap Up
Car title loans can help those with poor credit to get a secured loan. They are short-term loans that are meant to be paid off in a one-month period. Those that are considering a car title loan need to make sure that they are able to pay off the loan and understand the terms of the interest rate. Here at MaxCash Title Loans, we can help you get a cash title loan in a fast and easy way. We offer both small and large loans. Call us today or apply online today at https://www.maxcashtitleloans.com/.
