LOS ANGELES, November 30, 2021 (Newswire.com) - Title loans offer car owners a fast and often easy way to get a loan. Many lenders have lenient credit score requirements and consider the car's value when determining the loan amount and eligibility, and borrowers can often get their loan within a day. Here's how title loans work and three things borrowers should know before they apply for a title loan.
How Do Title Loans Work?
A title loan is a secured loan that uses a borrower's car title as collateral. These loans often come with easy applications and quick approvals, so borrowers may be able to receive funds the same day they apply. Since the borrower secures the loan with their car title, this makes the loan less risky to lenders. This means that borrowers with poor or fair credit can still get approved.
What to Know Before Applying for a Title Loan
Here's what borrowers should know before getting a title loan:
1. Auto Loan and Ownership Status
Title loan borrowers must own their car free and clear, meaning they've paid off any existing auto loans. Borrowers that don't own a vehicle may not be eligible for a title loan.
2. Loan Amount
Lenders primarily use the vehicle's value to determine the loan amount, but they won't offer the full appraised value. Instead, they generally lend out about 25% to 50% of its value, depending on the lender.
For example, if the lender appraises a borrower's vehicle at $20,000, that lender might offer $5,000-$10,000. However, if the borrower needed $20,000, they would either need to bring in a more valuable vehicle or consider an alternative loan option.
3. The Borrower Can Keep Their Car
One great feature about title loans — aside from them being fast and easy to get — is that the borrower gets to keep driving their car while the loan is outstanding.
That way, the borrower can get the cash they need without giving up their means of transportation. But before taking out a title loan, the borrower should make sure they can pay the loan on time and in full. Otherwise, the borrower would be at risk of losing their vehicle.
The Bottom Line
Title loans can be a great financial option for vehicle owners. Borrowers who own their vehicle outright and have a car valuable enough to get the loan amount they need will find them helpful — especially since they can keep driving their vehicle.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
Source: Advance America