If you are in the midst of a financial emergency or have bills piling up that you simply can’t afford, having access to fast cash can make a world of difference. However, unless you have stunning credit history, getting access to financial support can seem nearly impossible.
For this reason, many people turn to collateral-based loans to guarantee their lenders that they’ll be able to repay what they owe.
Title loans are certainly one of the most popular and common lending options out there. However, before you get yourself involved with title loans, there are a few things you should know ahead of time that can help you decide whether this is the best option for you. Here are the top 4 things you should keep in mind when you decide to take out a title loan.
1. You Could Risk Losing Your Car
Many people forget the fact that, when you exchange your car title for an immediate loan, you are putting yourself in a pretty tricky situation. If for whatever reason, you’re unable to repay your loan under the agreed-upon terms, you could very easily end up having your car repossessed by your lender. This could end up presenting real challenges for you on a day to day basis, not to mention the amount you will need to pay in fees to have the car restored to you.
For this reason, ensure you keep up on your payments and keep communication open with the lender.
2. Your Car Needs to Have Equity
Nowadays, with the price of cars having risen so much, many people find themselves having to borrow money to purchase the new or used car. This means that if you’re looking to borrow money using your car as collateral, you’re going to need some equity in that car to begin with.
Generally speaking, this means that you’ll have had to pay at least 25% of your car to qualify for a loan. If you just acquired the car before undergoing a financial surprise, and you haven’t paid down the lease, you could still qualify with a title loan lender. You just have to do your research.
3. You Will Need to Hand Over Your Car Title
What many borrowers tend to misunderstand about title loans is that every lender will allow them to keep driving their car. This is not true. The majority of title loan lenders only hold onto the car title, but there are some that will confiscate the vehicle until full repayment of the loan. And once you’ve paid back what you borrowed, the title loan lender will give you back your car title without issue.
4. Loan Amount Dependent on Car Value
One of the biggest factors that play into how much money you’ll qualify to get is the overall value of your car. The higher the value of your car, typically the more you’ll be able to borrow.
Generally speaking, title loan lenders are willing to provide anything from 25% to 50% of the value of your car, so you’ll want to know what this value actually is before you head over to a lender’s office expecting a hefty loan for your car.
With these 4 things in mind, you’re sure to be aware and knowledgeable of what to look out for before taking out a title loan.