If you own a car and there are no liens on the title, chances are you can get what’s called a vehicle title loan. This kind of short-term loan is a good way to get out of an unexpected situation, pay a bill, fund a trip, etc. But you’re a bit hesitant because of some misperceptions you have about the industry. Well, let’s clear up the most common ones. Here are title loan facts and fiction.
What Exactly is a Vehicle Title Loan?
This is a loan that is secured by your vehicle. By that we mean, your vehicle serves as loan collateral. So, you want to be certain to make your payments so you can keep your car.
How Do Such Loans Work?
You can usually apply online. You’ll be asked your vehicle’s make, model, year, and mileage. You’ll also likely have to supply interior and exterior photos of your vehicle.
Other than that, you’ll enter your full legal name, address, and phone number. You’ll also be asked for proof that you can repay the loan. A couple of paystubs will usually suffice.
Each company is different, in terms of how much you can get. In general, loan amounts range from $100 to around $5,500, although $10,000 or more is not unheard of. A good rule of thumb, in terms of loan amount, is that you can usually get between 25% and 50% of your vehicle’s value. Most companies consider your vehicle’s age, condition, and mileage when deciding how much to offer you.
The loan is usually due in 15 to 30 days, although some companies will give you a year. This is as opposed to payday loans, which are to be repaid when you get your next check.
Title Loans Fact and Fiction
Astronomical Interest Rates
Contrary to widespread misperceptions, interest rates are not prohibitive and are based on market analyses. In fact, such rates vary widely, depending on the lender and state laws. So, it’s best to comparison shot when looking for car title loans online.
Keep in mind that this is a short-term loan, so pay it off as soon as possible to avoid unnecessary interest charges.
If You Miss a Payment, You’ll Automatically Lose Your Car
Yes, your car does serve as loan collateral. After all, lenders must have some recourse in case of default. In this case, your vehicle could be seized and sold to cover the loan.
However, each state has rules regarding prior notice and opportunities for you to keep your car. A reputable company will work with you, allow you to do a refi, or give you a chance to buy back your vehicle.
To Get a Loan, You Must Turn in Your Car
This is an old but persistent myth that stems from pawn shops. Shops that do offer car loans will take your car and keys and keep them until your loan is paid off. The great thing about an auto title loan is that you can continue driving. All you must turn over is your title, which you’ll redeem once your loan is paid in full. After all, lenders know you need to get back and forth to work, so that you’ll have earnings with which to pay them.
You Need Good Credit for a Loan
Nope. In fact, most title loan companies don’t even look at your credit. Your vehicle is collateral, so they’re not worried about your credit score.
Every Title Loan Company Has the Same Fees.
This is another falsehood. Because individual states oversee the title loan industry, they often set caps and restrictions on fees company can charge. Within those, companies have a great deal of wiggle room. However, this is a competitive business, and lenders know you can shop around. So, most reputable companies do what they can to keep fees low; they’re flexible. And there’s nothing wrong with asking for what you want.
So, yes, there’s fiction regarding title loans, and then there are facts. Take the latter to heart to help you out of a pinch, being sure to make your payments. But you do need a reputable, credible lender. We suggest ChoiceCash.