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If you have an immediate need for a large sum of money, you might face the very scary prospect of being without options.
Most of us don’t have wealthy family members to turn to or investments we can sell for these emergency funds we must have.
This is when people turn to car title loans. As long as you own a vehicle, you have the opportunity to borrow the money you need.
Before we jump into the specifics of a title loan, let’s begin by looking at its simplest definition.
A car title loan is when someone borrows money and uses their vehicle’s title as collateral. In doing so, they agree to the lender puts a lien on their car’s title. They also hand over the physical title in exchange for the money.
When the borrower pays back the loan, they receive their title back. However, if they default, the lender has the option to sell the vehicle in order to recoup their investment.
That collateral is why a borrower’s credit score doesn’t really factor into the agreement. The score won’t impact the terms because they’re based almost entirely on the value of the vehicle. A lender would never offer more than the amount they could receive from selling the car.
This type of loan usually comes with higher interest rates to borrow money, though, as many of the people who apply for them have poor credit histories.
You may have also heard of them referred to as title pawn loans. That’s because, traditionally, pawn shops would take people’s vehicles as collateral in exchange for a cash loan. Once again, there would be no credit check as the cost of the loan would depend entirely on the value of the vehicle.
Before applying for a loan, find out how a lender will value your vehicle. Ideally, they should be referencing an objective third-party like Kelley Blue Book.
It’s important to remember that title loans don’t keep you from using your vehicle. You’re only handing over the title – not the vehicle itself.
So, you can continue using it as you normally would – literally nothing changes in that regard. No one has to know that you’re using your vehicle as collateral for a loan, either.
Some people confuse car title and payday loans, but the two are actually very different.
While both can be short-term loans (title loans aren’t always), that’s about where the similarities end.
The main difference is that payday loans are unsecured loans, meaning credit scores play a big role in the terms the borrower receives. Lenders need to be careful about whom they trust with a loan that isn’t secured by some kind of collateral.
These loans typically have repayment periods shorter than two weeks, though (or until the borrower will be paid next) and the loan is usually for no more than $500 because the interest is so high. Any annual percentage rate (APR) on one of these loans can easily reach 400%.
So, while some people think that the ideal alternative to a traditional auto title loan is at the credit union, they soon find out how expensive this other option is.
Depending on the value of the vehicle, a car title loan can be for substantially more than that – easily thousands of dollars.
Another version many people confuse with car title loans is personal loans.
Once again, a personal loan can be a short-term loan, as well, but this isn’t always the case. They can also be for much larger sums of money, too. Depending on your credit score, a personal loan could be for $30,000 or more.
There are three types of loans that can be secured by using the title of a vehicle. While these types of loans essentially function the same, there are some unique aspects among them worth exploring.
The traditional auto title loan is the most popular version, which we’ve already covered in detail. As long as the vehicle owner has paid off their car (or has nearly done so), they can use their title to secure a loan.
RV title loans work like car title loans, except that you can generally receive substantially more for the former.
Other than that, the process for securing an RV title loan (which we’ll cover momentarily) is almost completely the same. The inspection process is a little different but only because these large vehicles have a lot more to inspect.
They’re also rather popular among those who either own trucking companies and wish to expand or own their own truck and wish to start a company.
In either case, they’re sitting on a substantial amount of collateral that they can use to secure large sums of money in order to fund their business ventures.
If you need cash right now, there are only six steps required to secure a title loan.
Title loans are legal in the following states:
The laws governing these loans differ slightly by state, though.
For example, in Idaho, loans terms can’t be for longer than 30 days. Whereas, in Texas, the repayment period can last for 180 days.
As with any loan, you’ll start this process by filling out an application. Nowadays, most lenders will allow you to do this online, over the phone, or through a customer-support portal on their website.
In either case, this initial step is a simple one. You’ll only need to give some general information regarding the amount you wish to borrow and what kind of vehicle you have.
At this point, the lender just wants to do some preliminary work to ensure their services will be a good fit for your needs.
After submitting your application, you can usually expect to hear from the lender within a few days.
If it appears they’ll be able to help, they’re going to ask you for some basic documentation to confirm the required information, so they can finalize the loan.
Have these documents ready beforehand and you’ll be looking at a very short origination process. It could actually take less than an hour.
If one lender rejects you, having these documents ready will also make it much easier to simply move on to the next.
Here are the documents you need:
The next step is to finalize the terms and conditions of the loan. This will include:
Make sure you check the fine print carefully. Specifically, you want to avoid any loans that come with prepayment penalties. In short, this would mean you’d actually have to pay a penalty for repaying your loan early.
Finally, all you need to do is have your vehicle inspected so the lender can confirm that everything matches up with the information you provided in the second step.
Your lender should have nearby locations you can visit for this inspection. It generally only takes a few minutes, too.
Just sign on the dotted line, hand over your car’s title, and drive away with your money.
Before accepting any money, make sure you’re 100% clear on how to repay the loan. Obviously, you want to know the terms of your loan, but you also want to know how your lender accepts payments. Don’t assume or you may end up making a late payment by accident.
Most lenders don’t accept credit cards.
Instead, you usually have to pay via:
Hopefully, you found the above information about title loans helpful. Perhaps, you’ve even decided it’s a good fit for your needs.
If so, TFC Loans can help. We’ve been doing so since 1994. Feel free to contact us today and we’ll begin the application process, so you get that money ASAP.