You certainly don’t need bad credit to get a title loan, but if your credit history is less than perfect, it will not affect your ability to secure this type of loan. There are many, many title loan lenders and it should be quite easy to find one in your area.
The first step in getting a bad credit title loan is finding a lender. This can easily be done with a quick Internet search, which will bring up a lot of names.
Once you find lenders in your area, however, it is essential that you thoroughly research them before you sign on the dotted line. Getting a lender you trust and who is reputable can make or break a bad credit title loan. Glean what information you can from the lender’s website, and if you have questions, do not hesitate to call the office. Reading other borrowers’ reviews of a place is a great idea and will show you what people who are likely in the same situation as you thought about the loan they got.
In addition, it’s never a bad idea to check with the Better Business Bureau to find out if there have been any complaints lodged against a lender. Also, ask family and friends if they know of a bad credit title loan company they’d recommend; word of mouth always is a good way to go.
When you apply for a bad credit title loan, the lender does not even run a credit check on you. Why? You are giving him or her the title to your vehicle as collateral for the loan, so your credit history is irrelevant. Should you default on payments the lender is authorized to take your vehicle and sell it to recoup what you owe on the loan.
Since getting your vehicle repossessed and sold would make a bad situation worse for you, it is absolutely crucial that you negotiate with the lender to get a payment plan you can afford. Lenders don’t want to repossess and sell vehicles anymore than borrowers want them to, because it takes time and money to do that. Many are quite willing to work with borrowers in order to avoid having to repossess their vehicles in the long run, so make sure you get a good deal.
Bad credit title loans typically come with high interest rates—often in excess of 100%—so that’s another reason to make sure you can afford your payments, because high interest rates can really drive them up. Since interest rates vary from lender to lender, it would benefit you to search for the lowest rate you can find.
Once you settle on a lender, you can usually do a lot of the loan prep online. Other than going into the lender’s office for a vehicle inspection and so that he or she can assess the value of the car (by consulting Kelley Blue Book), you can get a car title loan for bad credit completely online. You can fill out the application, get pre-qualified, and even find out what your payments will be. Once you go into the lender’s office, make sure you go over the contract with a fine-tooth comb, because it will contain information not only about the loan terms, but also about circumstances under which a vehicle can be repossessed.
To get a bad credit title loan, you will need a few important documents, including a lien-free vehicle title in your name; a government-issued, photo ID, and some sort of proof of income (due to a federal law that prohibits lenders from discriminating against sources of income, if you are not working, you can use disability, pension, or unemployment as proof of income). Once you present these to the lender you should be good to go and be able to walk out of the office with cash in hand in about half an hour!
Bad Credit Loans vs. Other Loans
Clearly, the main difference between bad credit title loans and other loans is the fact that you don’t use your credit to secure these. Instead, you are using your personal property—in this case your vehicle—to secure the loan and use as collateral. Bad credit title loans typically come with higher interest rates than other types of loans, but it is a price you must pay when you do not have great credit. Should you take out and successfully pay off a bad credit title loan, however, it can actually help you build your credit profile!
A History Lesson
Bad credit title loans are a relatively new phenomenon; they first appeared in the early 1990s as a solution for those with poor credit ratings, and their popularity has increased throughout the years. Do not confuse a bad credit loan with an auto pawn. Although the two are similar in nature, an auto pawn requires the borrower to hand over both the car title and the physical vehicle as collateral while he or she pays off the loan.
Bad credit title loan lenders allow the borrower to keep his or her vehicle while paying off the loan, which significantly reduces stress on the part of the borrower because he or she can still get around, and most important, to get to work.
Yay Or Nay?
Not everyone is a fan of bad credit title loans. Many consumer advocates feel the high-interest lending services are designed to trap the under-served in a cycle of debt, but that is not always the case. Instead of seeing bad credit title loan lending as a creative extension of credit, these individuals look at subprime loans as another opportunity for government intervention and regulation.
Many defend bad credit title loans as a creative way for those who otherwise couldn’t get a traditional loan to get credit. When a financial emergency strikes those with bad credit they have nowhere to turn, and getting a title loan with bad credit can be very useful for providing short-term financial relief.