More than 78 percent of the American workforce lives paycheck to paycheck. If you’re one of them, you know that there are times when you just don’t have the money to cover unexpected expenses.
When those times pop up, the best thing you can do is look for a loan to give you the money you need fast.
There are many different types of loans to choose from but title loans offer some unique benefits that other options simply lack. Here’s what you need to know about this great loan option.
How Title Loans Work
When you take out a title loan, you’re essentially using your car as collateral against the loan you’re borrowing. This allows you to qualify for a loan even if your financial situation is less than ideal.
Standard lenders who issue traditional loans carefully consider your credit score and your financial strength when making their decision. If you have bad credit or a history of making late payments on your outstanding debt, you may not qualify for the loan at all.
Since title loans allow you to borrow against the value of your car, they’re much easier to qualify for. All you have to do is own the car outright and be willing to give the lender the title of your vehicle until you pay the loan off in full.
Once you pay the loan off, the lender will give you back the title to your car. If you fail to repay the loan by the end of the loan’s term, the lender will take possession of your car. They can then sell it to settle your debt.
This means you’ll lose your vehicle, but you won’t have to worry about paying off what you owe.
Lenders Determine the Maximum Amount of the Loan
When you take out car title loans, you won’t be able to borrow the full amount of your car’s value. Instead, lenders will give you between 25 and 50 percent of the car’s value as a loan.
Remember, if you default, the lender needs to be able to make money on the transaction. If they loaned you what your car is worth, they’d never be able to make a profit.
That said, the amount you receive will vary from lender to lender. One company may value your car at a different amount than another. To value your car, they look at what similar makes and models sell for in the current market and consider the condition of the car itself.
If the car is in good condition, you’ll get more than you would if it needs tons of repairs. It’s always a good idea to give your car a thorough cleaning before applying for a title loan. If the lender inspects the vehicle, it will look nicer thereby helping you get a larger loan.
You’re Required to Pay the Full Principal
Though your car secures any auto title loans you take out, lenders still expect you to repay the loan in full. This means paying back the loan’s principal amount plus any interest accrued over the life of the loan.
Your lender will let you know what you’ll have to pay each week or month prior to giving you the money. This will help you budget your payments and help you stay on track to pay the loan off completely.
If you fail to repay the loan, the lender can take possession of your car. You’ll lose the right to the title and will have to hand the vehicle over or risk legal action. However, as long as you pay the loan off and let your lender know of any issues with your payments, you should be able to keep your car.
Lenders Place No Restrictions on How You Can Use the Money
Some lenders place restrictions on how you can use the money that you borrow. For example, if you’re taking out a home renovation loan from your bank, you’re only allowed to use the funds for your renovation work. Even if you don’t use the full amount of the loan and want to use the remaining cash for other projects, your lender may take issue with it.
Title loans are truly flexible. Lenders place no restrictions on how you can use the money they give you. This means you can use the funds to cover unexpected bills or to help you get by until your next paycheck.
If a lender tries to place restrictions on how you can use your money, keep looking.
You’ll Want to Shop Around
Since different lenders will value your car differently, it always pays to shop around. Schedule appointments with several title lenders in your area and get quotes for loans from each one.
Compare the quotes closely. Pay attention to the amount they’ll lend you, the interest rate they charge, and any fees they’ll assess on the loan itself.
As a general rule, you’ll want to choose the lender that gives you the money you need at the lowest interest rate possible. Remember, the lower your interest rate is, the less you’ll end up paying over the life of the loan.
The only way to make sure you’re getting the best deal is to speak with several lenders.
Title Loans Can Help You Get Money Fast
If you need money quickly but aren’t sure that you’ll qualify for a traditional personal loan, title loans are a great option. They’re easy to qualify for and, as long as you make your payments on time, you’ll be able to keep your daily driver.
Just make sure to take your time and shop around for the best loan possible. The more you can compare your options, the easier it will be to get a good loan.
Though loans are a great way to help you make ends meet when money is tight, you should still do what you can to improve your finances. Check out our latest posts for more tips to help you better manage your funds each month.