Auto title loans are a quick and simple solution for some situations when you need cash quickly and especially if you have credit issues which leaves few other borrowing options available for you. However, before you decide to risk your car using auto title loans, read these tips first. You could avoid some potentially very costly mistakes if you know what to watch out for.
How Auto Title Loans Work
If you own an automobile, you can put up the title up as collateral and get a loan based on the value of the car. For example, many companies which offer these types of loans will allow you to borrow up to 50% of the value of your automobile. So if you own a car that’s worth $5,000 you might be able to put the title up as collateral and secure a loan for as much as $2,500.
However, if you’re still making payments on your car, the amount of your auto title loans will be determined instead by the amount of equity you have in the car. For example, if your car is worth $5,000 and you still own $2,000 then the lender will determine the amount of your loan using the $3,000 of equity you have in the car.
The good thing about these types of loans is the lenders generally don’t require a credit check because they have your car title as collateral and security for the loan. Meanwhile, you can still drive your car and pay back the loan in payments. Of course, auto title loans do carry an interest rate which will be determined by the lender when you fill out the application. Be aware that interest rates and terms can vary widely among auto title loan lenders.
It’s also important to remember that if you use one of these types of secured loans, you need a plan for how you’re going to pay the money back. This is certainly a loan which you can’t afford to default on. If there are other options for you to get a loan with bad credit, be sure that you consider those as you’re considering whether an auto title loan is the best answer right now. Other quick cash type loans include; unsecured personal loans, payday cash advance loans, guaranteed payday loans, fast business loans and secured personal credit loans.
Auto Title Loans – Avoid Costly Surprises
As you are searching for an auto title loan company, it’s important to look into the company’s reputation and make sure that they have a track record for helping consumers like you. Always compare at least 3 different lenders offering auto title loans and by all means ask for a copy of their loan papers to review before you enter into any loan contract and read them carefully.
It’s very important that you read the entire auto title loan contract before you sign anything and be cautious for any additional fees and default clauses. Also review the loan terms and conditions carefully and pay careful attention to the insurance requirements and know exactly what property you are pledging as security for the loan, (is it only your vehicle). This way, there will be no surprises when it comes to paying back your loan without hassles. Remember that many people using auto title loans are doing this as a last resort or as a short term solution for getting quick cash, and you certainly don’t want to get involved with any financial lender who could take advantage of your financial situation. You should always seek the services of other professionals for legal, account and tax advice before you sign anything.
With a bit of diligence, you should be able to find a number of reputable companies offering the types of quick cash loan that you need and then you can be well on your way to overcoming your immediate cash needs. There are a number of specialty car financing companies online today that specialize in providing auto title loans and you’ll find these companies offer many options because they network with many of the largest auto finance companies across North America and even Canada. Remember an informed borrower is a wise borrower, good luck to you.