With unemployment and the high cost of living hitting millions of people's wallets these days, car title loans are becoming a popular source for fast cash. Also called title loans, car title loans are loans in which a car owner borrows money on their car's title. Their vehicle is used as collateral for a loan.
While this type of loans are short termed, they carry higher interest rates than other sources of credit. These rates can range from 36% to as much as 100%. It depends greatly on the residing state.
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Car title loans carry high interest rates because the lender doesn't run a credit check. Instead they loan money based solely on the condition and value of the borrower's vehicle, which is determined by the Kelley Blue Book.
Getting car title loans is basically easy. It normally takes less than thirty minutes. The amount, however, can be as little as $100.00.
In order to get a auto title loan, the lender has requirements that must be met by the borrower. First, the borrower's vehicle must be paid in full; thus, allowing him or her to hold the car's title. Second, there must be no liens or financing against it. In addition to these requirements, the vehicle being used for collateral must have full insurance coverage.
A borrower must strongly be aware of the fact that if he or she is unable to repay their loan, the lender has the right to take possession of their vehicle. If this happens, the vehicle will be sold in effort to cover what is owed on the borrower's loan. This same situation can occur if the borrower is late with his or her payments. This is usually a last option that lenders take since they lose money during this process from repossession, auction and court costs. On top of this, the vehicle is depreciating in value.
Throughout this ordeal, however, most states allow borrowers a chance to recover their vehicles. This is done by requiring lenders to hold the vehicle for 30 days, giving the borrower an opportunity to pay the balance.
Financial hardships will place people in positions that require borrowing money. If this should happen, it is important for borrowers to know what situation he or she is facing so they can make the right decision about whether to get a car title loan, unsecured, or any other type of loan.
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