In the event of a medical emergency or sudden vehicle breakdown, many people may not have the money on hand to meet their needs. In these cases, a car title loan can provide you with the funds you need to get back on your feet fast. Here is an explanation of how car title loans work and the advantages of these types of loans.
Basic Overview of Car Title Loans
As the name implies, a car title loan uses the title of your vehicle as collateral for a small loan. The details of such a loan are slightly more complex, as not everyone who owns a vehicle will qualify for a car title loan. To determine if you qualify, lenders will analyze the equity of your vehicle.
If you own a vehicle and are no longer making payments, the equity is equivalent to the value of the vehicle. If you are still making payments, you must owe less than the value of the vehicle to have positive equity. The higher the equity of your vehicle, the more a lender will be willing to lend you.
How Payment Works
Most car title loans last for a period of 30 days, and most lenders will also charge a lending fee in addition to the value of your loan. At the end of the loan period, you will be expected to pay back the full value of the loan as well as the lending fee. If the loan cannot be paid, the lender will have the right to repossess your vehicle.
While the risk of losing their vehicle may be a matter of concern for first-time borrowers, many lenders offer a rollover on the loan. If you roll over your loan, you will have another lending period to repay the loan value, the initial lending fee, as well as an additional lending fee for the second period.
They Are Easy to Apply For
Your credit score plays a big part in your eligibility for many types of loans. Car title loans are unique in that most lenders will not even consider your credit when you are applying for the loan. Aside from analyzing the equity of the vehicle you are offering for collateral, the lender will simply verify that you have a reliable source of income. This makes car title loans one of the most convenient types of loan available.
You Can Continue to Drive Your Vehicle
When you hear the term collateral, you may imagine a lender taking possession of property until they are paid back. In reality, items that are used as collateral for a loan typically remain in possession of the borrower and are pledged to the lender in the event that the loan isn't paid.
If car title loans required relinquishing your vehicle to a lender, they would not be a viable option for the vast majority of borrowers. Because the lender can keep the title to your vehicle instead, you have the advantage of being able to continue driving your vehicle while the loan is unpaid.
Borrowers Receive Cash Quickly
If you are in need of extra cash today, car title loans can be one of your best options. Even with good credit, you may often find yourself waiting a few days for your loan request to be approved if you apply for a bank loan. With a car title loan, you can expect to walk out of the lender's office with cash on the same day that you apply.
Car title loans can sometimes be the perfect solution to a financial crisis. Now that you have an understanding of how car titles work and their advantages, you can make an informed decision about whether they are the right option for you. For more information, consult resources like http://driveittitleloan.com.Share