What Is a Car Title Loan? A Simple Guide
Are you looking for a rapid solution to help you with expenses you cannot currently afford? If you’re wondering what a car title loan is and if this would be a good option for you, keep reading.
In this guide, we will go over this loan type as well as how car title loans work so that you can see if this would benefit you. Learn more about this loan type before attempting to secure it for the best results.
What is a Car Title Loan?
Some turn to car title loans in order to get a loan option with quick approval for a short term loan. However, these loans can be very costly, as you hand over the title of the car to the lender until it is completely repaid. This entails pledging your vehicle as collateral but can be a good option if you need funds right away for an emergency cause, such as a medical procedure.
You will need to have enough equity in your car in order to borrow against your vehicle and fund the loan. Typically, you will need to have any other loans associated with the vehicle paid off but some lenders will still allow you to borrow if you are still paying off expenses such as a standard auto purchase loan. These loans can average anywhere from $100 to $5,000.
The amount in which you receive from a lender will depend on the equity you have in the car or the value of the car. Ultimately, the greater the value of your vehicle, the more money you will receive. You can receive these loans through storefront finances companies as well as some bank and credit unions.
Repaying Your Loan
Car title loans are short term loans, meaning you have to repay them within 15-30 days. For this reason, to completely repay this loan type you need to come up with the funds very quickly. In some cases, you can rollover the loan to extend the payment period.
When rolling over a loan, you can get a brand new 30-day loan but it can be an expensive way to borrow as there will be new loan fees associated with each payment. Laws on rolling over loans differ by state.
It’s important to consider interest rates when securing a loan, as they can often be quite high. However, some states may limit how high these interest rates can be. Additionally, you typically pay fees to get a title loan which can increase the price of this borrowing method.
Things to Know Before Securing a Car Title Loan
If you are in an emergency financial situation, securing a car title loan may be a good idea for you. However, it’s important to make sure you are clear about how this loan type works so that you can repay it effectively. Make sure this is the right loan option for you so that you can protect yourself against additional financial distress.
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