There are times in life when you need extra cash urgently. With the current economic situation, finances can be tight for some people. It’s quite understandable that you will be looking for a way to get a quick loan. The problem comes when a bank rejects your loan application as you have a bad credit. This is where the car title loan can be a great borrowing option for you.
An online car title loan is a loan that you can get in exchange for using your vehicle as collateral. Technically, the collateral doesn’t always have to be a car. It could range from trucks to motorcycles or any other kind of automobile. The loan is a short-term one with repayment in usually 30 days. The loans have earned themselves a lot of popularity due to their simplicity and efficiency.
How a car title loan works
This loan is just all about using your car as collateral. You don’t need a good credit score to qualify. All you need to do is have your credentials checked and verified, then present your car title along with a copy of your car keys.
If the car title loan is granted, you are required to start repaying back the loan at the stipulated time, usually after 30 days. However, the loan tenure could be longer, depending on the agreement you have with the lender.
If you pay up on time, you get your car back. However, if you may have trouble paying up the loan, this will mean that the lender may let you roll over the outstanding loan amount. If he doesn’t, your car will be repossessed and sold for the lender to recover his money. This is rare as the lender will usually give you a couple of options before the car repossession.
How to apply
Car title loans are as simple as other collateral loans. Basically, you go to the lending company to apply for the loan, or you can do it online. You will need to fill out some details, such as personal details and the amount of money you want to borrow. The company will then review your application and verify your details. Your car, which you are using as collateral, will be inspected and verified. This is to determine the market value of the car to determine the maximum amount of money you can borrow using your car.
The company will require you to sign a contract before the loan amount is handed to you. The loan is mostly given to you in a check or deposited into your bank account. The whole process will take a maximum of 2 or 3 days.
Many people ask if they could apply for the loan even if the car is not fully paid for. That is not an issue. If you have enough “ownership” or a percentage stake on the car, you could get the loan. You only need to show how much of the car you own for you to qualify for the loan.
If your loan tenure is two years, you can easily calculate the loan’s annual percentage rate. Compared to other types of loans, a car title loan has a high annual percentage rate. However, it’s a small price to pay for the convenience. Usually, the annual percentage rate of car title loans is between 300%-350%. This means that the monthly interest rates fall at around 25% of the total cash borrowed.
The loan can be serviced in different ways. The first option is to physically make the repayment by visiting the company’s office. This is the most common mode of payment.
However, times are changing now and most people are adopting the new forms of payment like online payment. With this, you can directly make the loan payment from your mobile phone. This is a new and convenient mode of repayment and is very popular among borrowers.
Some people prefer another repayment mode. This involves the lending company actually getting money from your deposit account every month. However, this is done with the approval of the borrower and his bank. The company is usually not allowed to do more than one withdrawal from the deposit account.
Times could get tough. You may not be able to repay the loan on time. The lender has the choice of reviewing the loan. This means that the lender will include new terms on the outstanding amount. Interest rates may also be changed. It also has additional fees for processing the loan again, plus the penalty fee for not repaying the loan on time.
Rollover is a second chance for you to repay the outstanding debt. This allows you to escape the painful loss of your automobile. The rollover can be done more than 2 times, depending on how you negotiate with the lender. However, the problem here is that the loan keeps growing, and you may end up in a debt trap in the end.
This is the inevitable fate of any borrower who is unable to repay his debt. The lender will get your car and sell it to recover his money which you couldn’t pay up. However, car repossession does not happen immediately once you miss one repayment. The lender will give you a couple of more options to repay before ultimately deciding to go with the repossession option.
Depending on which state you live in, the lender may give you the remaining cash after selling your car. Or he may keep all the money after the sale of your car. It depends on the legislation of the state that you are in.
Car title loans are an easy way to get money. However, they are also very risky since it’s putting your car on the line. You could lose it.