Most people own a car, but many don’t realize that they can quickly and easily use their car as security for a car title loan. This means that you can have access to a loan and your automobile becomes collateral for that loan. This type of loan is usually taken in an emergency or time of need where other types of personal loans are not suitable. It should not be confused with an auto loan which is used to purchase a car and is a completely different financial product.
A car title loan is very easy to apply for and you will be accepted within minutes on most applications. Typically a lender will offer you 50% of your vehicles resale value, but some will offer more in certain situations. However, there are a few requirements that you must consider before applying;
- You must hold title on the vehicle itself – shared titles require the signature of both parties.
- The vehicle must be paid in full without outstanding loans, financing or lease agreements.
- In most circumstances you will be required to have full insurance on the vehicle.
Although this type of loan can be very useful they also have some serious downsides that need to be taken into consideration. Firstly, the interest rate on a title loan can be quite high in many cases. Secondly, because your car is required as collateral should you be unable to repay the loan you may lose your vehicle. You may be allowed to roll the balance over, but this also comes with drawbacks. It is a good idea to carefully consider the advantages and disadvantages of a car title loan before applying!
