Life is expensive, even if you run a lean startup, bootstrap a business, or work as a frugal entrepreneur. No matter how well you plan your budgeting, emergency expenses are inevitable. So if you aren’t well prepared with enough extra cash saved up to handle it, you may be compelled to seek a helping hand. While we all try to avoid it, taking out a loan is sometimes the temporary or long-term solution we need while we get our finances in order. There are many different types of loans available though, so which lender option do you opt for?
Car Title Loans To The Rescue?
In such situations, applying for car title loans may the best way to acquire funds soon enough to take care of your emergency. But before considering a title loan, it is vital that you understand what defines this type of loan. While this specific loan uses your vehicle as security for a loan, it also has its pros and cons. You need to do your research and due diligence before selecting a car title loan.
Car title loans have advantages and disadvantages like anything else. Let’s delve further into the pros and cons of car title loans.
Why You Should Go for a Car Title Loan
With car title loans, you use your car as an indemnity against the amount you’re borrowing. Yet you get to have the cash you need, keep on using your car, and when you have the agreed installments, you repay the loan comfortably every month. It's a lender agreement that provides simplicity and convenience in short time if needed.
Pros Of Car Title Loans
1. No Credit Checks
The reason why car title loans attract many people is that it is easier to get a loan. Most title loan lending firms do not check your credit history, and they can approve your request even if you have bad credit.
2. Fast Loan Approvals
Once approved, you can receive your car title loan very quickly. In many circumstances, you simply submit your application and receive the funds within 24 hours, unlike standard loans. The loan is amount is often less than your vehicle’s value, which helps the lender if it appears that you are unable to pay off your loan.
3. Easy Access
Car title loans earn their popularity because they are easy to access. The paperwork is simple and swift, and you can do it from the comfort of your home, school, or work. With a computer and reliable internet, you can fill out your loan application form and submit a car title loan within a few minutes. And you don't have to wait for too long to get approved. The best part is that you'll receive funds directly into your account.
4. Fair Interest Rates
This is one of the principal advantages of car title loans. These collateral loans have low and flexible interest rates if you compare them with other loans. This is because lenders are regulated by the state and will only charge you interests as the law stipulates. As a consumer, you are well protected by law against extortion.
5. Minimum Loan Requirements
Car title loan requirements are very simple and minimal. Most times, the loaning company will ask for your ID, car title, and proof of identity, residence, and income only. Your car should be at least ten years old and have a valid name and title.
Why You Should Be Cautious When Taking Car Title Loans
While taking a car title loan may seem an excellent idea of settling your emergency expenses, you should know that it also comes with some drawbacks. So before you give it a thought, check out the cons of car title loans below.
Cons Of A Car Title Loan
1. The Possibility Of Car Repossession
If you can no longer manage to remit payment for your car title loan, the lender can repossess your vehicle and other belongings. However what they can take depends on the laws where you live, so make sure you educate yourself on Massachusetts Car Repossession Law if you live or work in MA.
Some loan companies allow you to roll over your loan into a new one, causing you to add extra interest and fees to the rolled-over amount. Imagine adding more money to your already defaulted loan. This will plunge you deeper into debt. As your interest compounds, you will lose your car because the lending institution will want to get back the money you borrowed. This also means you will have to pay much more to get your vehicle back from repo.
2. High Fees
When perusing your contract, be cautious about the hidden fees some lenders hide in their fine print. These costs include credit insurance, repossession fees due to default, and more. The first thing you do before signing your contract is to check the fine print. Let your lender clarify to you the total cost of your loan and APR. This will help you to compare with other firms to find one with the best offer.
3. Lending Institutions Place A Lien On Your Car’s Title
After handing in your car's title, your lender will place a lien on it. The lien will then be recorded by the state motor vehicle department. This means you won't be able to get another car title loan until you fully repay the previous one.
4. Short Repayment Periods
Some loan firms want borrowers to repay their car title loans within a short time, say six months to two years. This may inconvenience you if you can’t manage to pay it back on time. This will also attract late fees and worsen your already bad situation. That is why you need to research more to compare terms and fees from different lenders.
5. Aggressive Loan Collection Tactics
Some lenders apply unacceptable loan collection tactics when you default or delay your payment. Since they have your address, phone number, the address and phone numbers of your references, and your employment address, they are likely to contact your references and employers to collect payment.
The best thing to do to avoid this is to understand the state laws governing loan collection methods. Your state may have taken stringent measures to prevent certain collection methods from being used by lenders. Vet different lenders to choose one that doesn’t follow such practices.
Title Loan Take Away
Requesting car title loans comes with its benefits and disadvantages. While you’ll receive your loan without much hassle, you may encounter high fees and interests if you are not careful. Before deciding to sign up with a lender, do more research for less expensive options available. Understand their terms and ask them about the APR and loan fees. Know what you are getting into first before deciding for yourself what the best loan option is!
