Life is unpredictable as anything can happen anytime. There may come a time in life when we find ourselves in an emergency situation and need cash as soon as possible. This is when people look for getting personal loans. However, for the past few years the credit markets have tightened and obtaining a personal loan has become extremely difficult. Considering the difficulty to receive personal loans, a smart alternative to get quick cash is to take out a car title loan.
When you are financially handicapped or in a need of money fast to handle an important need, a car title loan can come to your rescue. This is a type of loan especially for people facing critical emergencies and need cash urgently. Whether you need a quick loan to start a new business or to settle some personal needs, or for a medical emergency, a title loan is a good option.
A car title loan is defined as a secured loan acquired by offering the title of your vehicle to the lender as collateral. Despite the ease of getting this type of loan, it is important for borrowers to know the loan process and follow some tips to ensure that they use the loan option successfully.
1. When to borrow
The ease of application and obtaining car title loans makes them a lucrative option for people. However, considering the amount of interest you pay on loans, it is highly recommended to get car title loans only for the right reasons. People often use these loans for fulfilling their luxury needs like for vacations. A loan of any type must be used during financial emergencies, such as paying past due bills or paying for medical expenses.
2. How much it will cost
Often apart from the interest rate, there are some hidden fees. This means borrowers are required to understand the total cost before taking out a title loan. This includes calculating total interest amount and reading all of the fine print of the title loan agreement to make sure there are no unexpected fees, charges, and other costs. Title loans are usually for short period between 24 and 48 months and come with a high rate of interest.
3. Understand applicable laws
The car title loans are not allowed in some states while others have some laws regarding obtaining this type of loan. Therefore, it is vital to understand what laws are applicable in your region and ensure that the title loans are allowed in your state. The legislation on this matter covers issues to do with administrative charges and fees, interest rates and repossession following default by the borrower.
4. Know the payment options and hidden fees
Before signing the loan agreement, make sure you know the payment options and ramification of early repayment. Understand the payment plan of the lending company, whether they only accept online direct fund transfer or payment in person or via an automated system. Some title loan companies penalize the borrower for early repayment. This means, suppose, you have a loan term of 12 months and you might want to pay more and finish paying off the loan in ten months. Now, you need to find a reputable title loan company that has no hidden fees or penalty for early repayment of loan amount. In addition to this, you need to know the consequences of not paying the loan back on time like paying a higher interest rate, huge late payment fees, or even losing your car.
5. Make sure you keep driving your car
A car title loan uses the title of your car as collateral but this doesn’t mean you need to hand over your vehicle to the lending company for the entire loan period. You will provide the pink slip or car title to the lender for the issuance of this type of loan which provides the evidence that you are the owner of the car. The lender gets to see your car and inspects it in an evaluation process. Some companies require you to give them your vehicle but the best lenders do not need your vehicle and let you keep your keys.