If you own a lien-free title motorcycle or a car and want to get a loan, then getting a title loan is one of the most easiest as well as a convenient way of getting cash. Only those people apply for a title loan who do not have any other convenient financial option. It is basically provided for a short period of time and is a small amount. Though there are numerous loan lenders available in the market. Before applying for a loan, the very first question you need to ask yourself that “which type of loan is best suitable for you and why?” The perfect answer to this can be only given after figuring out “how much money you need” and “how much time you will take to repay the money back”. Once, after, determining everything, now you can easily decide the best suitable loan for you and the best lenders to provide you with it.
Car Title Loan Working
Applying for a car title loan is quite easy and simple, yet it is very expensive because the money is only provided for about 30 days and if you are unable to repay back your loan, then it is possible that you might lose your vehicle to the lender and the person can resell it for recouping the amount of the loan. Also, while borrowing the money, you have to pay a particular amount as a fee to the lender. In simple words, car title loan is a loan which is given against a car as collateral. These loans are also known as title loans or auto title loans.
Required Documents for Car Title Loans
The first thing is to have a lien-free title car or any vehicle is a must. Certain paperwork must be done by the lenders, which include the following:
- Sole ownership papers with the original title of the vehicle
- Identification issued by the Government
- Residence proof or a utility bill
- Registration of the vehicle
- Proof of the insurance of the vehicle
- Proof for repaying back the loan in time
- Valid references with phone numbers and names
- Vehicle key’s working copies
There are many lenders who even ask for an attachment of a GPS tracker to the car so that in any default case, lenders can easily repossess the car or can remotely disable the car. To get a car title loan, you need not to have a good credit because it depends on the vehicle’s resale value.
Rates and Fees of Car Title Loans
No doubt that car title loans are expensive and even the interest rates do vary. Generally, the interest rates are set at minimum 30% per month or 360% annually. For instance, if you borrow $2000, you will need to pay $2600 at the end of 30 days, if you don’t want to fall into default.
Car Title Loans Alternatives
Before applying for a loan, it is important to evaluate the alternatives, which might help you in acquiring money easily. It will help you in comparing the penalties as well as the interest rates between all the options available.
1. Credit Cards: It is important to compare the interest rates of car title loan with your credit card. If you own a credit card, but doesn’t have an enough limit to fulfil your requirement, then you can call your credit card company and ask for high limit. You have a better chance of increasing the credit limit, if you have a better payment history. But make sure that you compare the interest rates of your car title loan and credit card, whichever is lower, go with it.
2. Emergency Loans: You can apply for emergency loans from your office or company because now, most of the companies have an emergency loan program benefits which easily help their employees with a financial support. Though the loan program varies from employees to employers, but the loan interest might be low or free. Also, the terms for repayment too varies.
3. Payday Loans: Applying for a payday loan might charge you higher interest, but can save your car even after breaking your contract because of non or late-payment.
4. Personal Loan from Bank: Banks do offer personal loans to their customers at a low interest rates as compared to the car title loans. But, unfortunately, these are not better than the rates on your credit card. The best part of getting a personal loan from a bank is that you have a set time frame to repay the loan amount.
If you think that only car title loan can get you money fast and is the most convenient option, then you are wrong because there are numerous other options available (few mentioned above). If you own a vehicle outright and even understands the high potential loan cost as well as reasonable expectations for repaying the loan, then you are considered to be the best candidate for the car title loan. If you are not a realistic one, then you might lose your car in the end.