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Car Or Vehicle Title Loans
Sometimes meeting the strict financial requirements of banks and other more traditional lenders is extremely difficult. If you’re having trouble building your credit score or have no credit history at all, getting a loan from the bank can seem impossible. Thankfully, there are many alternative options available to those who are dealing with a financial emergency and need money quickly. Auto title loans, in particular, are a fast and easy way to secure a car loan for those struggling with poor credit.
What Are Car Title Loans Or Auto Title Loans?
Car title loans (aka: auto title loans) are a form of credit Canadians can use to get a lump sum of cash. Like a personal loan, it is repaid in installments over a period of time plus interest. However, unlike a personal loan, it is secured against the title of your car. Meaning, if you default on any payments, your lender has the right to seize your car to recoup payment.
To qualify for an auto title loan, you’ll need to own the vehicle outright. Other than that, it’s fairly easy to qualify as lenders don’t usually require a credit history. Moreover, loans against a car title can usually be obtained in a day or two and they can be a viable short-term solution if you need cash for an emergency.
How Does A Car Title Loan Work?
Car title loans or auto title loans are secured car loans, with term lengths that can vary between 3 months to 3 years. They typically have high-interest rates, which can legally go as high as 60% (APR). When you take out a car title loan, your lender will assess the value of your car and use it to determine how much to lend to you. Typically lenders will lend up to 50% of your car’s value. However, the loan amount can be as little as $100 in some places and run as high as 75% of the KBB resale value of the vehicle.
Once the borrower and lender come to an agreement, a lien is placed on the vehicle and is only lifted once the loan is paid off in full. Moreover, there can be no outstanding liens or outstanding loans on your vehicle.
As a borrower, you can take advantage of the fact that your vehicle is an asset and can use it as collateral to secure the loan you need. Loans against a car title are often easier to be approved for because they are secured, which makes it a great option for credit-constrained individuals.
What Is A Lien?
The lien is what makes a secured car loan, secured. It is a type of security interest that is placed on the vehicle, it’s meant to help ensure that the borrower will, in fact, make their loan payments on time. If the borrower stops making payments on their loan or cannot afford to pay the loan off in full, the lien (which is the vehicle in this case) can legally be repossessed and then sold so that the lender can recoup the cost of the loan.
Gather Your Documents
Before applying, gather all the documents necessary to apply for an auto title loan. Many applicants get rejected or have their application process delayed due to incomplete or missing documents. In general, you’ll need proof of identification, proof of income, proof of employment, and proof of car title.
Find A Lender
Auto title loans can only be found with alternative lenders, banks and credit unions do not offer auto title loans. To help you find an auto title lender with the best offers, you can use a loan comparison website like Loans Canada to get multiple quotes from different lenders using a single application.
Complete The Application
After you review your offers, you can complete the application process with the lender of your choosing. After that, you’ll simply need to wait for approval, after which you should receive your within a few hours to a couple of days.
What Documents Do You Need For An Auto Title Loan?
An auto title loan is pretty cut and dried. There is usually any number of companies that provide loans against a car title in your town and many now do business online. You simply go in and fill out a short loan application. Although there will be some differences depending on which lender you chose to work with, most will require:
- Personal Identification – This includes documents to verify your name, address, and phone number. Lenders usually accept a driver’s license, passports or some other government-issued photo ID.
- Financial Details – Some auto title lenders may require proof of income and employment. This can include bank statements or pay stubs.
- Vehicle Title Documents – One of the most important documents you will need to bring is your car title document. This is necessary to prove that you are the legal owner of the car.
- Car Insurance – Lenders require that you have insurance on your car, so you may need to purchase it and provide proof.
- Vehicle Details – You’ll need to provide information regarding your car’s make, model, year of the car and mileage.
- Vehicle Inspection – Your lender may also require a car appraisal to verify its condition and value.
Thinking of trading in your car? Find out if you should trade-in your used vehicle or not.
Car Title Loan Eligibility Requirements
Being approved for a car title loan is, generally speaking, easier than being approved for an unsecured loan, but like any other type of loan, there are a few requirements that need to be met.
- Your vehicle must be fully insured before it can act as collateral
- Your vehicle must be no more than 8 years old
- There cannot be any outstanding debt attached to your vehicle
- You must be 18 or older and be in possession of a valid driver’s license
- You must have all the appropriate registration papers for your vehicle
Can I Get An Auto Title Loan If I Have Bad Credit?
If you have a low credit score then an auto title loan (aka: car title loan) is probably the easiest way to obtain a loan. Your weak financial profile is offset by the fact that the car loan is secured, and as such, your application will appear far less risky to the lending officer who is reviewing your file.
Where Can I Find A Car Title Loan Near Me?
Car title loans can be found both online and at physical locations near you. However, it is easier to find auto title lenders online in your area than in a physical location.
|Loan Amount||$1,000 – $15,000|
|Terms||12 – 60 months|
|Funding Time||Less than 24 hours|
|Eligibility||– Car must be less than 8 years old|
– Car must be paid off
– Car must be insured
– Clear title
|Documents Required||– 2 valid photo IDs|
– Proof of income
– Proof of address
– Photos of vehicle and vehicle’s odometer
– Proof of insurance
– Proof of ownership of the vehicle
– Void cheque
– 5 References
|Geographical Availability||Across Canada|
Benefits Of A Car Title Loan Or An Auto Title Loan?
There are several benefits to this type of financing if the borrower doesn’t abuse the option.
- They’re fast – Loan approvals for auto title loans can take as little as 15 minutes.
- They’re convenient – If you have bad credit, you don’t have to worry, auto title lenders accept all types of borrowers. So long as you have your car title, there’s shouldn’t be much hassle.
- They don’t require a down payment or a credit check – Unlike a car loan, an auto title loan doesn’t require a down payment, nor a credit check due to the security it provides. The value of your vehicle allows you to gain access to the funding you might not have been able to get approved for before.
- Lower interest rate – Because you’re providing collateral in the form of a vehicle, you’ll often be able to qualify for a lower and more affordable interest rate than a payday loan.
- Still own your car – For the duration of the loan, you’ll be able to use it just as you did before. However, your lender will have a temporary hold of your title until you repay the debt.
Disadvantages Of A Car Title Loan
The disadvantages are less than they used to be since provinces have passed some legislative reforms. Some provinces have placed a cap on the amount of interest a title loan company can charge. There is also legislation as to the maximum loan amount in some jurisdictions, as well as the number of these loans a consumer can take out within a year. The disadvantages mainly have to do with not understanding the terms of the contract, not making payments in a timely manner, or taking on a loan that you can’t realistically afford. Additionally, you should watch out for:
- Collateral – Auto title loans are secured car loans, meaning if you miss any payments, your lender can seize your car and sell it in an effort to recoup payments.
- High-Interest Rates – While these car loan are secured, they often have a higher interest rate than other secured loans because they’re intended for those with rocky finances.
- High Fees – They also charge numerous fees that can quickly add to the cost of the loan. Some common ones include administrative fees, loan origination fees, vehicle inspection fees and more.
Learn more about your rights and responsibilities as a borrower.
These disadvantages can be overcome by making sure you read the contract thoroughly and understand the consequences, pay the loan off in the shortest amount of time, and avoiding using this quick and easy financing as a short-term solution to long-term financial problems. The consequences are debt you can’t manage and the loss of your vehicle. If you are in a cash emergency and use this type of financing as it was intended, a car title loan can be a good source of funding. Just make sure to shop around, read the fine print, and pay it back within the allotted time and you should be okay.
Can I get a loan against my car title if I’m still paying off my car loan?
What credit score do I need to get approved for a auto title loan?
How much money can I borrow with a auto title loan?
Will getting a auto title loan help improve my credit?
What is the difference between a car loan and a auto title loan?
A Great Way To Secure The Money You Need
If you’re in need of a loan fast and have been rejected by the bank and other lenders then a vehicle title loan could be the solution you need. Title loans are short-term easy to pay off loans and therefore are a great option when your income is tight but life is still happening. The convenience of a car title loan will allow you to deal with whatever emergency or financial needs you might have right away.
If you’re interested in more information or want to start the process, Loans Canada can help.
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