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How Car Title Loans Work
A comprehensive understanding about how car title loans work is one thing that will guide you in your decision to get a car title loan. You need to understand how loans work in general and how car title loans, being a form of loan, are designed to work.
A loan, which comes in different forms and types, is a term that describes how a sum of money collected with an agreement to repay within a time frame. Loans may be secured or unsecured. Secured loans require collateral, while unsecured loans can be gotten without any collateral. And these loans are issued by different lending institutes and bureaus.
People take out loans for different reasons, but mostly when there is a significant need for cash and there is insufficient or no cash available at the time. This loan or cash advance could be in the form of a personal cash advance from your bank, payday loan, or loan through a credit card, and they all have similar working principles, but differ in terms of interest rates, payment plan, loan limit and even loan term.
A car title loan is a special type of secured loan, quite similar to a payday loan, but with milder and more flexible terms. And a car title loan is the perfect funding option when there is an urgent financial necessity and the need for emergency cash is unavoidable. But before we go into how car title loans work, let’s take a quick peek at what car title loans really are.
What Are Car Title Loans
A car title loan is a quick and sure way of getting an emergency money loan without going through the stress of conventional bank loans. This type of loan is a secured collateral loan. Meaning that to get a car title loan, you will be required to offer collateral in exchange for the cash advance. And the collateral in this case is the title of your car or vehicle.
Car title loans are otherwise known as auto title loans, pink slip loans, vehicle title loans, car title pawns or simply title loans for short. And just like any other type of loan, car title loans are given at an interest rate with a specific repayment period. This implies that when you get a car title loan, you are to pay off the borrowed sum, including the interest, before the loan period is due.
So whatever may be the emergency situation, be it an urgent medical bill you have to pay, cash to settle your utility bills, urgent repairs and maintenance or money for tuition fees, you can take care of any of such emergencies with a car title loan.
It’s very easy to get a car title loan using the document that declares your ownership of a car as collateral, and to get a car title loan, you first have to qualify for the loan. to qualify for an auto title cash advance, you must meet the following criteria;
- You must have reached the legal age of obtaining a loan (usually at least 18 years)
- You must own a car or at least have enough equity in the car
- You must have a sufficient income source or regular endings that can well withstand paying off the title loan.
How Do Car Title Loans Work?
If you are new to title loans, you will definitely find this article very helpful because you will find out all you need to know about car title loans and how they work.
The way car title loans work is not complex at all. Simply put, in a pink slip loan, you are borrowing money against the value of your car, giving up only the document of ownership of your car as collateral. This is quite similar to an auto equity loan if what you are using as collateral is the equity in your car.
Your car will be evaluated to determine its present day resale value using the Kelley Blue Book (KBB), but you don’t get the entire value of your car as the loan. After the KBB value of your car is reached, you will be allowed to borrow a certain percentage of this value. Sometimes, you could be allowed to collect up to 85% of your car’s value.
The more your car is worth, the more cash you can be allowed to take out as loan, and your lender keeps your car title as the lien holder, only to return back the title when you completely pay off the title loan.
Ideally, the auto title loan is designed to be short termed, but however, the loan duration varies from one car title loan company to another. The car title loan interest rate also depends on the title loan lender, however, the rates are relatively lower than that of credit cards.
Car title loans are quite different from conventional loans from tradition lenders like banks and credit unions. With a car title loan, the rigorous documentation process, long wait at the financial institutes, as well as the long period it takes to get the loan is completely eliminated. With a car title loan, you can qualify, get approved and receive the instant cash advance you need on the same day – a perfect solution for emergency situation.
Getting an emergency cash loan through a car title loan is;
- Quick, and
In a nutshell, we can say that a car or vehicle title loan offers you an opportunity to receive a certain percentage of your car’s value as cash advance, which you are obliged to pay off within a time frame at an interest rate. You will not be asked to give up your car, rather, what you surrender is your car title or pink slip.
Failure to comply with the loan payments as agreed is called a default. And when you default, your lender has every legal right to seize your car and auction it off to recover the debt. This process is called repossession. It is important to note that car title loans work differently with different title loan agencies and policies. While some will not hesitate to impound your car if you default, others might choose to work out other measures with you until you completely clear your debt.
How Can You Get a Car Title Loan?
For you to get a car title loan, you just have to follow the following simple steps;
- Approach a competent title loan company near you
- Fill out an application form
- Get approved
- Provide the documents required by the title loan lender
- Make your car or vehicle available for inspection
- Sign off the agreement contract
- Receive your cash
You have to approach a good title loan company near your location to get a title loan. The title loan business is quite popular nowadays and there are numerous car title loan companies near you. You can visit their physical title loan office near you to file a car title loan application or simply visit their website to do an online car title loan application. Some title loan companies make it easier by allowing you do an over-the-phone application.
Once you have applied and you are qualified to get the loan, you will receive an instant approval with an initial non-obligatory quote, giving you the go ahead to proceed with the rest of the car title loan process. After you’ve been approved, you will then have to provide some simple documents, including photos of your car showing how much mileage you have in it.
You will also have to make your car available for inspection. The car inspection process is to physically access the condition of your car, as well as determine its roadworthiness. Once your car is okay, with no unappealing damage on its body, you can then go ahead to sign the terms of agreement and collect your cash. You can either receive this cash as a direct payment to your bank account, check or as physical cash.
The beauty of how car title loans work is that you can get the cash you urgently need in one business day.
Will My Credit Score Affect My Chances of Getting a Car Title Loan?
Banks, credit bureaus and other traditional financial institutes pay much emphasis on your credit score before you can even qualify to get a loan. With a car title loan, the case is different. Your credit is not a yardstick for receiving an auto title loan. This is because, most people who need urgent financial assistance are already in a tight spot, financially, and a great credit is no longer their strength. In fact, car title loans are structured to assist people with poor credit get access to loans without any hassle.
Your credit score is a three-digit number that tells anybody your credibility in terms of repaying your debts. While a person with perfect credit record is an ideal candidate for a loan, you can also get a car title loan no matter the nature of your credit. You may have a credit score below 600 and still qualify for a car title loan.
There are also car title loan companies that specialize in helping people with bad credits, so with a car title loan, bad credit is not a limitation.
Remember, your credit history is no limitation in getting an instant title loan approval. The most important question to answer is; Are you confident you can comfortably repay the loan? If yes, then you are good to go.
It is very easy to get a car title loan with bad credit. And below is the outline of all you will need to get a car title loan – bad credit or not.
Car Title Loan Requirements
It will be necessary to mention here that just the way we have car title loans, we also have title loans for other types of automobiles like motorcycles, big rigs, trucks, SUV and recreational vans. And while owning a car is a prerequisite for getting a car title loan, owning any of the other automobiles is also a requirement for the other forms of title loans.
Listed below are the basic documents you will need to get a car title loan;
- Your car title or pink slip
- Your car
- Any state authorized means of identification to authenticate your personal details and age, like your driver’s license
- Proof of residency to validate your current location at the time of application. You must be resident in the state you are applying for the title loan.
- Proof of how much you earn regularly. Your regular income must be able to withstand the monthly loan payment.
- Photos of your car’s interior, exterior and mileage.
- Details of at least two references.
These documents are very easy to obtain, and from the way a car title loan works, the sooner you get these papers ready, the quicker you get the car title loan.