What is a Title Loan?

A title loan is, simply put, a loan given out with the title of a vehicle put down as collateral. Title loans are slightly different than title pawns in that with loans, only the hard copy of the title needs to be surrendered. Some pawn shops allow borrowers to drive their car through the duration of the title pawn, but not many. Title loans through check cashing agencies simply hold the title and place a lien on the vehicle and allow the borrower to retain their property.

Many check cashing shops around the country offer title loans and they can be an easy and excellent source of much-needed cash. They are especially useful for unexpected car repairs, because, well, if you can't afford to fix the car - it's a goner anyway.

The first step to getting a title loan is to see if your vehicle qualifies for a loan. Even if your car is reportedly worth several thousand dollars on the private market, it may not qualify. Most check cashing websites offer a way to pre-qualify your vehicle in just a few steps. If your vehicle does not qualify according to the website, you may need to seek out a different source for a loan, but it never hurts to double check with your local check cashing store.

If your vehicle does qualify, obtaining a loan is very simple. You can either apply online, or at a nearby check cashing store but no matter how you do it, be sure to read the terms and conditions of the loan very carefully. As one can imagine, since the borrower's credit is not used as a qualifying factor in receiving the loan, the interest rates can be sky high. Lenders almost always verify income and ability to repay the title loan, but it is still considered a high-risk transaction.

Generally speaking, the amount disbursed on a title loan is around 26% of the value of the vehicle and the interest rates can run as high as 300%. According to bankrate.com, the median title loan is around $845 while the average value of the vehicle on the line is around $3200.00. This can certainly pose a serious threat to the borrower, but when there is a cash emergency and no other way to obtain a loan, it is often a risk worth taking.

As with any other loan, title loans on a vehicle should be carefully considered and thoroughly researched. And, if the online application is confusing or the terms and conditions are not crystal clear, be sure to call or visit your local check cashing store or title loan company to speak with someone in person.

Comments

What do you think?

Comment
Your Name
Your E-Mail (Will NOT be displayed)