If the situation is not in your favour, you are suffering from the financial crisis, and you will get your salary after some time then the car title loans for you. If you have full equity in the vehicle and the title of the car is in your name, then you can easily apply and get the cash quickly with the car title loans.
You might have seen some advertisements regarding the car title loans, but you are not sure that what are they? How do they work? What are their pros and cons? Then don’t worry because here we will discuss them in detail.
What is a car title loan?
A car title loan is a loan that is meant for a short period (short-term loan). This loan is also referred to as the “secured loan” because in this loan you have to place your vehicle as collateral for the loan. The collateral system in this article is quite similar to the mortgage in which the lender has the authority to take back your home in case you fail to pay the amount.
Typically, the lenders offer you cash which is equal to the 25% or 50% of your vehicle’s value (but it differs from lender to lender). Generally, the auto-title loans have a due date within 30 days.
Reasons to go for the car title loan
If there is no other option and you require cash in a hurry for some emergency or need then a car title loan can be of help. The car title loan is available for everyone (who has full equity in his car) no matter what kind of credit score or history he has. But this can be a problem because the lender can give this loan to a person who has a car but he might not be able to repay it. Some good lenders check your income statement to get an idea before they can lend you the amount.
Reasons not to go for the car title loan
Most of the people think that this loan as a bad idea. Furthermore, this loan is banned in half of the states of the USA. The states which allow these loans highly regulate the lenders so that they can’t scam people.
The car title loans are one of the most expensive types of debt out there. Some of the states of the USA have limited the interest rates to 36% APR but on the other hand, some lenders charge 300% APR.
Let us take an example that if you took a loan of $1000 with 300% APR or 25% monthly fee then after one month you’ll have to repay $1000 along with $250 finance charges.
According to the 2016 Consumer Financial Protection Report, only 12% of the people are able to repay the auto-title loans after one month. If a person can’t repay the loan within time then he has two options. First one is that he has to lose his vehicle (which was placed as collateral) or he has to roll his previous loan into a new one.