Given that nearly half of all Americans don’t have $400 to cover a last-minute emergency, if you’re in need of a title loan, you’re not alone in this fact. Many people who own vehicles and work a regular job fall into a position where they need a quick infusion of cash to get through the month. Once you understand how do title loans work, you can unlock the potential to get the money you need without having a lot of collateral to offer.
Here are five things to expect when you apply for a title loan.
1. Expect A Range of Values
Car title loans can vary wildly based on what you need. Title loans can just a few hundred dollars, depending on the value of the vehicle being offered. They can also climb to tens of thousands if the vehicle is a brand new luxury car.
Lenders base the value on a percentage of a vehicle’s market value, so if your car has lost value in the last few years, it will yield a smaller loan than it could have.
Title lenders usually offer loans that have a lower value than what traditional lenders will offer. While this might seem like a negative, it’s actually a bonus if you don’t want to be forced to take out a massive loan that a traditional lender requires.
If you just need a few hundred dollars to pay off a bill, this is the way to get it.
2. Expect A Range of Interest Rates
One of the most important factors when it comes to taking out a title loan is to be able to pay off the loan at a fair interest rate. The interest rate of a loan can make even the fastest and fairest seeming loan cause you a major headache.
While the average interest rate for a 30-day title loan can be as high as 25%, that’s not the case for every single loan out there. You could end up finding a loan with a rate that’s half of that. If you’ve got good credit, a good car, and a good job, you might not pay the kind of interest that other people would for a similar loan.
3. Get It Fast
When you think about getting a loan, do you think you’re going to get it fast or do you think it’s going to take weeks? You’re probably thinking it could be weeks before you even get to have a conversation with your loan officer about whether you’re eligible for the money. Thankfully that’s not the case with a title loan.
When you apply for a title loan, you’re starting off by getting involved in a streamlined process that is user-friendly and easy. Often, the loan you get can be given out on the day you apply for it with very little paperwork. You could even get it within an hour.
Rather than spending half a day sitting around a bank or traditional loan office then waiting weeks for your check, you could get in, get out, and get on your way fast. You’ll be finished with the process in the time it takes to watch your favorite TV program.
4. Most Vehicles are Eligible
If you’re curious whether or not the vehicle you drive would be eligible, the truth is that it probably is.
In fact, if you have a vehicle of any sort, you might be able to get a title loan based on that. Any kind of van, truck, or RV could be eligible for a title loan. Even vehicles as diverse as ATVs and planes are eligible.
If you own a motorized vehicle of any kind, you might be eligible for a title loan.
Everyone needs a quick infusion of cash at some point. While the term auto title loans might be misleading for some, the broad range of possible loans you could get make this perfect for just about anyone. As long as you own the motorized vehicle and have the paperwork to prove it, you can probably get a title loan based on it.
5. Understanding the Risks
While you might be excited about the speed, efficiency, and ease in which you can get a title loan, don’t sign without reading the fine print. If you don’t understand the risks entirely before you sign up, you could end up in trouble.
The fundamental concept behind a title loan is that you’re putting your car or vehicle up as collateral in case you can’t pay back your loan. While some people get that in the abstract, the specifics can vary wildly.
Some lenders will give you a grace period of a few weeks to pay back before they send a tow truck to get your vehicle. Others could take your vehicle at one minute after midnight on the day after the deadline to submit payment.
Read all of the fine print before you sign a title loan because nearly one out of every five loan customers loses their vehicle. If this is even a remote risk for you, you may want to reconsider this possibility. Giving up your vehicle is no joke, especially if you’re still leasing it.
Learning How Do Title Loans Work Takes Time
When you’re first getting a handle on how do title loans work, you might not realize the risks that you’re taking or the scope of the benefits. Weighing the good with the bad is part of getting comfortable making important financial decisions. When you’re in a position to make major financial choices, it’s good to know what to expect.
If you’re thinking you might want to start making money with cars instead of borrowing, check out our guide for tips.