Sometimes surprise expenses happen. An unexpected bill, home repair, auto repair, or emergency can put a strain on your finances. Sometimes you just don’t have the money on hand to pay for the bill that caught you off guard. When you are in this situation and need money, a car title loan may help.
We are going to discuss the pros and cons of car title loans, how they can benefit you, and what you need to keep in mind when you are considering a car title loan.
The first pro of a car title loan: It’s quick to apply.
The first benefit of a car title loan is that the application process is quick and efficient. You fill out a short application with some personal and vehicle information and the process is started. It’s as simple as that!
The second pro of a car title loan: You get your cash right away.
The second benefit is that the approval process is efficient and speedy. The amount you can apply for is based on the value of your car. Some lenders will allow you to take up to half of the value of your car out as a loan. Once you are approved you can get access to the money you need, most of the time on the same day you apply. This is definitely helpful in a pinch when you need that cash right away.
The third pro of a car title loan: It requires no credit check.
The last benefit to using a car title loan is that these loans do not require the lender to check your credit score. This is because you are using your car title as collateral for the title loan. This is definitely helpful for people with a less than optimal credit rating.
On the other hand…
Although car title loans can be helpful to some people in an emergency, car title loans can also have their drawbacks. There are some concerns that need to be addressed before you take out a car title loan.
The first con of a car title loan: The high interest.
The first con of a car title loan is that the interest you will face upon repayment of the loan. The interest on a car title loan can far exceed the interest on a credit card. It can range from 25% to over 200% depending on the lender you go to. A reputable car title loan lender will ensure that you are clear about the annual percentage rate and not just the monthly interest rate when taking out the loan. Make sure you are able to repay the loan as quickly as possible – definitely by the due date – to avoid late fees.
The second con of a car title loan: There is the possibility you can lose your vehicle.
When you take out a car title loan the lender will put a lien against your vehicle. This means that if you are unable to repay the loan, the lender has the legal right to repossess your vehicle to collect on the debt. This is a major con to taking out a car title loan. Make absolutely certain that you can repay the loan in the allotted time if you don’t want to have your car taken away!
The third con of a car title loan: You have to shop around for the best terms.
The last con is that you will need to diligently shop around when considering a car title loan. This is because the terms, interest, and fees can vary from lender to lender. It is in your best interest as a customer to ensure you get the best deal. Make sure you that you fully comprehend the terms of your loan and do your homework on the lender before you sign on the dotted-line for that loan.
Overall, car title loans can be a quick and easy way to cope with a short term cash flow issue. Of course it is not an option that should be used regularly, to avoid being stuck in a cycle of needing to use car title loans regularly. It is recommended that you shop around, and ensure you know the APR and terms before taking out a car title loan.
This article was written by Eugene. Q. Willis, a financial writer, who shares his thoughts on pros and cons involved in car title loans.