In 2020, 22% of adults in the United States had a personal loan. Most of those loans, in turn, originated from traditional lenders like banks. However, some borrowers also took out loans from non-bank financial institutions.
Car title loans are examples of such non-bank loans.
In this guide, we’ll discuss the basics of car title loans. Read on to discover what they are, their pros, and their risks.
What Is a Car Title Loan?
A car title loan, also known as an auto title loan or title loan, is a type of secured short-term loan. The vehicle itself serves as the security or collateral for the financial product. The amount you can borrow, in turn, is a percentage of your car’s current market value.
The exact percentage depends on where you live; for instance, in the US, it ranges from 25% to 50%. So, if your car is worth $10,000, you may be able to borrow $2,500 to $5,000.
Note, however, that some states have specific limitations on title loan amounts. For example, under Kansas law, the maximum amount a title lender can issue is $2,500.
As for repayment terms, you usually have 30 days to pay back the title loan. That’s why car title loans classify as short-term loans.
It’s vital to repay a title loan on time, as failure to do so will force the lender to seize and take ownership of your car.
What Are the Benefits of Car Title Loans?
One of the chief benefits of auto title loans is that borrowers with bad credit can still qualify for one. The folks at Easytitleloans.ca even say that title lenders don’t do credit checks. As such, you don’t have to worry about poor credit history affecting your chances of securing a title loan.
In addition, many title lenders allow you to apply for a loan online, so you don’t need to take your car to their office. In this case, you have to fill out an online application form. You also need to upload photos of your vehicle and other documentary requirements.
It’s also easier to get a loan from title lenders than banks, as most title loans don’t require credit checks. Moreover, most lenders issue the funds the same day they receive qualified applications.
What Are the Requirements?
The most important qualification for a title loan is vehicle ownership. You must be the registered owner of the car you plan to use as collateral for the loan. So if your ride is still under an auto loan, you may not be able to qualify for a title loan.
In addition, even if title lenders don’t do credit checks, they still need assurance that you can pay back a loan. As such, most of them require proof of employment and residence.
You also need to present your driver’s license and another government-issued ID. In most cases, you must also provide a copy of a valid auto insurance policy.
Title lenders also need to gauge the condition and worth of your car. If you apply for a 100% online title loan, high-resolution photos of your car will suffice. However, if the lender requires a physical inspection, you have to bring your ride to their office.
Consider Applying for Auto Title Loans During Emergencies
As you can see, car title loans are easy to qualify for, and you may even get the cash you need the same day you apply. However, they’re also far more expensive than bank loans, which can make it hard to pay them back. As such, it’s best to consider these loans as a last resort or only during emergencies.
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