Auto title loans are a simple and quick solution to some terrible situations when you need cash quickly and especially if you have poor credit which leaves few other borrowing options available for you. However, before you decide to use your car as collateral for auto title loans, carefully read these tips first. You could avoid some potentially very costly mistakes if you know what to look out for.
How Auto Title Loans Work
If you own a car, you can put up the title up as collateral and secure a loan based on the value of your car. For example, many companies that offer these types of loans will allow you to borrow up to 50% of the value of your car. If you own a car that’s worth $6,000 you would be able to put the title up as collateral and secure a loan for as much as $3,000.However, when you’re still making payments on your car, the amount of your auto title loans will be determined rather by the amount of equity you have in the car. For example, if your car is worth $6,000 and you still own $3,000 then the lender will determine the amount of your loan using the $3,000 of equity you have in the car.
The good thing about these kinds of loans is that the lenders generally don’t require a credit check because they have your car title as collateral and security for the loan. Meanwhile, you can still drive your car while you pay back the loan as scheduled. Of course, auto title loans carry an interest rate which will be determined by the lender when you fill out the application. Be aware that interest rates and terms can vary from one auto title loan lender to another.
It is very important to remember that if you use one of these types of secured loans, you need to have a plan for how you’re intend to pay back the money. This is certainly a loan which you can’t afford to default on the payment. If there are other options available for you to get a loan with poor credit, ensure that you consider those as you’re considering whether an auto title loan is the best answer for you. Some quick cash type loans include; unsecured personal loans, payday cash advance loans, guaranteed payday loans, fast business loans and secured personal credit loans.
Avoid Costly Surprises
As you are searching for an auto title loan lender, it is important to look into the company’s reputation and ensure that they have a good track record for helping consumers like you. Ensure you compare at least 3 different lenders offering auto title loans and by all means ask for a copy of their loan papers to review before you proceed into any loan transaction and read them carefully.
It is essential that you read the entire auto title loan contract terms before you put your signature and be cautious for any additional fees and default clauses. Also ensure you review the loan terms and conditions carefully and pay detailed attention to the insurance requirements and know exactly what property you are pledging as security for the loan, be sure it is only your vehicle.