People take out title loans for a wide variety of reasons: as a bridge between pay checks, to make a utility or car payment, to get some holiday cash, and to pay rent, to name a few. If you’re thinking of taking out a loan against your car, you probably have plenty of questions.
Borrowing cash using your car title can be an easy, fast, painless process if you do things right, and it can get you out of a financial jam when you have nowhere else to turn.
If you’re wondering if you can borrow money against your can, if you have a government-issued photo ID, a free-and-clear vehicle title (or even a vehicle that is almost paid off), and some proof of income (disability and unemployment payments count due to a federal ban on companies discriminating against types of income), you are a slam-dunk for a car title loan.
How To Borrow Money Using Your Car As Collateral
If you are looking to borrow money using your car as collateral, first you need to find a good title lender.
This isn’t very hard with all the lenders online these days; just search for a few in your area, peruse their websites, and perhaps read some borrower’s reviews of the service.
Or, opt for a title lending service that deals with lenders nationwide and can find the best one to fit your individual needs.
Loans against cars are unique in that they do not require credit checks; you are using your vehicle to secure the loan, so if you have a spotty credit history, don’t sweat it.
Do, however, remember that if you take a title loan you are giving the lender your vehicle title until you pay the loan off. Once that loan against your car is paid off, the lender gives you your title back and you go on your merry way.
Once you have your documents in hand, you’ll need to go into a lender’s office so he or she can visually assess your vehicle and determine its worth by consulting Kelley Blue Book.
The loan rep will make you a loan offer, but before you take it, make sure you get a full disclosure on your payments, such as if they include any other miscellaneous fees.
Terms of Your Loan
After you and the lender decide on a loan amount, discuss loan terms until you are sure you understand everything. Lenders do not want borrowers to default on loans; it’s a real hassle for them to repossess and sell vehicles to get back the loan money.
They are typically willing to work with borrowers, so make sure you go in with your best negotiating skills at the ready and work out payments that you can realistically afford and that satisfy the lender.
Don’t be tempted by a high loan offer that you simply can’t pay back; if the lender has no other options, he or she will repossess your vehicle, and losing your car would only make a bad situation worse. Once all of that is done, if you have any questions, ask them!
Lenders are more than willing to answer anything that you may be confused about.
When you are clear on the loan, its terms, and the contract wording, you just sign on the dotted line and can often walk out with your money the same day!
Making payments on your title loan has never been easier: lenders usually accept cash, debit card, money orders, Western Union wires, and cashier’s checks.
And as the demand for these types of loans increases, some organizations are even adopting software designed for mobile devices enables potential borrowers to see how much they can get on a loan for their vehicles as well as estimated monthly payments they’d need to make.
Secured vs. Unsecured Loans
Loans against cars typically carry pretty high interest rates, often topping 100%. Rates vary from lender to lender, however, so searching for one who offers the best rate is a good way to go.
A secured loan is backed by your personal property—in this case your vehicle. These types of loans are called secured because if you fail to make your payments, the lender can take your vehicle; this “secures” him or her from financial risk.
An unsecured loan, also known as a personal loan, is one in which no collateral is needed. The loan is enforced via the contract the borrower and lender sign.
Examples of unsecured loans include credit cards, lines of credit, and student loans, and getting this type of loan depends on your credit score and income.
Since unsecured loans depend on rating and income, borrowers without sufficient amounts of each are often denied credit or given a very high interest rate.
Borrowing cash using your car title is a relatively new type of borrowing; these types of loans first appeared in the early 1990s as a solution for those with poor credit ratings, and their popularity has increased significantly. Do not confuse a registration loan with an auto pawn.
Although they are similar in nature, an auto pawn requires the borrower to use both the car title and the physical vehicle as collateral, which means handing over the vehicle for the lender to store while you pay off the loan.
One great thing about title loans is that they enable 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 carry on daily life activities while paying off the loan.
If you think a registration loan could be the answer to your financial emergency, definitely explore the option.
Armed with good information and the right documents, you can make a title loan work for you!
Just remember to satisfy the key requirements, which include finding a good lender, gathering the correct documents, negotiating the best loan terms you can, and of course making timely payments.