You need money fast, but what if a bad credit score keeps you from accessing traditional short-term loans or lines of credit? Taking out a car title loan is one way to get your hands on some fast cash with no credit check and minimal income verification. This may sound pretty straightforward, but this kind of loan can lead borrowers deeper into debt and, in extreme cases, without a car.
If you were to take jewelry or other valuables to a pawn shop, an employee behind the counter would appraise your items and give you a loan based on what your items are believed to be worth worth. In this case, the pawn shop will lend you money and charge interest. If you don’t pay back the money within the agreed-upon time frame, you will forfeit your items. This is similar to how a car title loan works.
In a car title loan, the lending company evaluates the price of your car based on wholesale values and then gives you a loan based on what it thinks your car is worth. The lending company then holds on to your car’s title until your loan is repaid. The loan isn’t similar to when you bought your car. This loan is a short-term loan with a hefty interest rate; if you don’t pay back the money within a set time frame – with interest – you’ve essentially sold your car to the lending company by default.
Because this type of loan is based on equity you’ve built up in your car, with most title loan companies, you will be required to own your car outright. If you still owe money on your car loan, your car’s title is still in the hands of the bank, so you can’t use it as collateral for a loan. Other requirements may include a minimum age, proof of your residence and proof of your income.
Driving your car to the title company to expediently get the money you need may seem simple enough, but before you give this loan the green light, you need to know what you are legally committing yourself to. Read More