How Do Car Title Loans Work
A car title loan is a type of loan where the borrower uses his car as collateral. The loan against auto title has its own advantages and disadvantages. Mostly, car title loan companies target low-paying individuals who cannot afford the terms. Initially, the companies only show the monthly interest that would make the borrower say yes.
The Good and Bad of Car Title Loans: Pros And Cons
Why most people tend to go for a title loan is basically because of its advantages that include the following:
- The most common reason would be is that it provides easy cash. Once you submit for an auto finance title loan, the financial company readily gives the money upon agreement of both parties. It takes only about 15 minutes to get the cash, which is often far less than the car value.
- The financial company does not check credit history of the borrower. Although many lenders generally check the source of income of the borrower, the transaction only values the worth and the condition of the vehicle.
- The mortgagor will not lose the use of the vehicle.
Why Is It Bad?
The disadvantages are far more notable than the good sides of submitting to an auto title loan. This auto bad credit loan title has been labelled “predatory lending” because of the following reasons:
- High interest rates that can go to outrageously three-digit annual percentage rate (APR). That 200% APR or higher is not an overstatement. Unfortunately, only few states pass strict laws to control it.
- It is a short-term loan. Not long enough for one to pay for the credit and interest especially the APR.
- It may lead to repossession and a whole lot of financial problems.
- The lender company may also charge fees and will add up to the money borrowed.
What You Should Do To Loan against Auto Title
Thinking about having the car title loan? Think again—and again. However, here is a pointer to ponder if no other resort is available:
- Be sure to know the APR, not just the monthly rate.
- Be certain to know other fees that come with the title loan as they will automatically add up.
- As much as possible, pay within the due date.
To avoid the astounding financial trouble that ties with title loans, here are some acceptable alternatives to try:
- Some employers and credit card companies grant pay check and cash advances.
- Borrow from family and friends.
- Acquire small consumer loans or financial assistance.
- Get a second job to increase income.