Car Title Loans

By Caitlin in Auto
Car Title Loans

Car title loan are just what the name implies: A loan taken out against the value of your vehicle. They are fairly easy to obtain; loan brokers don’t usually require a credit history and the loan amount is secured by the vehicle itself. A title loan can usually be obtained in less than an hour and they can be a viable short-term solution if you need cash for an emergency. There are several advantages for this type of loan and some things the consumer should be careful of when considering a title loan.

How Does a Car Title Loan Work?

A car title loan is pretty cut and dried. there are usually any number of companies that do title loans in your town and many now do business online with a brick and mortar stores conveniently located to pick up the loan check. You simply go in and fill out a short loan application. The title loan company will need:

  • Your name, address, and phone number
  • The make, model, and year of the vehicle
  • Mileage
  • Proof of insurance coverage
  • Employment information for the borrower

The loan amount can be as little as $100 in some places and run as high as 75 percent of the KBB resale value of the vehicle in good condition. There can be no outstanding liens or outstanding loans on your vehicle and you may have to surrender your title until the loan is paid off. These are meant to be short-term loans and a typical loan duration is 90 days.

What are the Benefits of This Type of Loan?

There are several benefits to this type of financing, if the borrower doesn’t abuse the option.

– They’re fast. Loan approval can take as little as 15 minutes.
– They’re convenient. You can walk in with your title and get your cash with a minimal amount of hassle, and most towns have multiple lenders to choose from.
– They don’t require a down-payment or a credit check.
– As long as you pay them back within the original loan term, they are a safe and affordable emergency option.

Are There Any Disadvantages to Taking Out a Title Loan?

The disadvantages are less than they used to be since states have passed some legislative reforms. Some states 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 type of loans consumers 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 allowing the loan to roll over and becoming a larger loan based on money you already owe.

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 a pile of debt 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.


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