4 Things That a Person Needs to Know About Title Loans
There are actually many different types of loans out there for many different purposes. For instance, there are loans that people take out for certain expenses, such as buying a car or a house.
There are also loans not meant for any one specific purpose, but rather to handle whatever financial needs you have, such as title loans.
Title loans involve a lender putting a lien on your car’s title to get some quick cash for emergencies. Often, title loans can lend about 25% to 50% of the car’s total value.
1. They Are Not Risk-Free
To put things simply, while it is easy to get a title loan, it comes with risks. Whether a person needs the cash for an emergency or that person simply wants the money for other reasons, if a person cannot repay the title loan then there is the risk that they could lose their car.
Losing a car can often mean losing your ability to work. Be aware of the risk when putting your car up for collateral.
2. Be Aware of Higher Interests and Possible Fees
In addition to the risk of losing a car, title loans also come with higher than usual interest rates. Additionally, some lenders may have additional fees as well. As with any loan, if you are not able to repay the loan within the stated period, you should reconsider getting the loan.
Even if you make the minimum payments, you can find that you end up paying a significant amount of interest over a long period of time.
Do keep in mind that the lender always needs to say what the APR and total cost of the loan is, allowing you to decide if it is really worth getting the loan.
3. The Car Has to Be Owned
If a person is still considering taking out a title loan, there are a few things that person needs to note. For one, the car that the title loan is for needs to be owned by the person taking out the loan.
At the very least, the person taking out the loan needs to have some sort of equity in the car. The person cannot have any liens on the car either. Often, when filling out the forms for the loan, the lender will require photo ID, proof of insurance, and photos of the car itself.
4. The Loan Term Is Very Short
Last, but not least, the last thing that needs to be taken into account when getting a title loan is that the loan term is often incredibly short.
In fact, these loan terms can be as short as 15-30 days. This means if a person chooses to take out such a loan, he or she needs to make sure that the money can be repaid in that amount of time, without letting the interest get too high.