At some point in our lives, we have all needed or will need a loan, such as a title loan. Everyone from a contract based worker to a millionaire needs to borrow some cash to offset a financial emergency. The emergency could be to pay rent, to cater to business investments or to settle hospital bills. Regardless of the reason, you usually want the loan option to be fast, but bear in mind that when you take a loan, the lender will make money over time through the interest and the fees they charge. This is usually a win-win situation for everyone, provided everyone remains faithful to the terms of the loan.
Car title loans are by far some of the most common emergency loans there are in the 21st century. If you have taken time to take a leisurely drive into your local town, you’ve probably noticed a bunch of shops with high floating signs written ‘Title Loans, Get an Instant Loan’ in bright colors. Read this guide to find out more about car title loans and why they might work for you.
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What is a Title Loan?
The first step we should take in dissecting this type of loan is understanding what it is. An accurate term for this loan is a car title loan because it requires that you provide your car title as collateral for the loan amount you’ll get. Generally, you will approach the emergency loan lender, get a quotation for the value of your car and then give the title in exchange for a loan amount equal or less to the said value, usually, it is less.
The way lenders have structured these title loans is that the whole process from application to loan disbursement takes place within a day, assuming you fill out the loan form in time and provide the necessary documentation in time. Even if the loan isn’t available on the same day, it should be on the next business day. Once you get the money, you are required to start thinking of repayment immediately because this usually begins with your next payday.
Unlike other types of payday loans, Title loans afford you a higher loan amount and because of this, you get to repay it in installments for even three years.
What do you need to get the title loan?
Part of the reason they are popular is that they do not have strict requirements. At the top of the ‘lenient’ list is that you don’t need to have a great credit score as anything above 600 will do. You don’t have to be earning a six-figure job or even own a luxury vehicle to secure the loan.
However, you will have to prove that you have a stable income by providing pay stubs or offering contacts to your current employer.
You cannot take a loan using a vehicle whose title is not in your name, but you don’t have to be the primary driver of the car to get a loan. This means that even if your license is suspended, you can still use the car as collateral.
Are title loans legal in the US?
It is with some excitement that we take note of the rise in the number of title loan lenders in the US. This has led to the fulfillment of the demand for emergency loans that was growing steadily, but it’s not all sunshine and rainbows. With the increased numbers, there is also a growing number of predatory lenders. These lenders set up legally but have rates and regulations that take advantage of borrowers in dire situations. Because of the few bad seeds, some states have taken strict steps to criminalize or put strict regulations on title loans in the US. According to Wikipedia, some of the states that allow title loans include:
- New Hampshire
- New Mexico
- South Dakota
- Rhode Island
- South Carolina
Many of the states listed above have some regulations that put a cap on the interest rates. Before you proceed to take a loan, you should review the restrictions and car title loan terms in your state as these laws will help you make an informed decision.
Advantages of Car Title Loans Near Me
- Quick Money – the money is processed within a business day
- Easy Approval – you don’t need to have a perfect credit score
- Convenient Locations – some lenders have multiple store locations for added convenience
Cons of Title Loans
- High-Interest Rates – even with the interest caps, the rates are still high
- Loan Amount – depends on the value of your car
- Loss of Car – if you default on your loan
How to take a car title loan
Most title loan lenders have offices in different states. In addition to the offices, they also have an online platform through which you can apply for your loan. You can opt to fill the form online or at a store location. Online forms are fast, but when you visit a store location, you have the opportunity of negotiating the terms of the loan and getting a better deal. Very few borrowers know they can do this and you are now among them!
Once you fill out the form, you will need to take your car for valuation. The valuation process will determine the maximum loan amount you can get. If everything checks out and the loan amount you requested is within the limit, you get the money.
After the money lands in your account, you will start thinking of repayments on your next paycheck. Title loan lenders don’t come with a grace period.
You will repay the loan in installments over several months, depending on how much the loan is and the installment you agreed to every month.
Whilst we are on repayment, you should take note that title loans have high APRs. They may not be as high as those of payday loans, but they are high nonetheless. If you miss a repayment, you risk not being able to catch up and incurring more costs in lateness fees.
The APR percentage gives you a clear picture of the cost of the loan. Therefore, you should not consider the interest rate alone as it can be misleading. Typical title loan interest rates are at 25% for a month, which means that if you take $1,000 for 30 days, you will repay $1,250 in the end.
What happens if I cannot repay the amount?
If you cannot repay the amount on time, you should take the initiative of calling the lender at least two days before the deadline. Explain your situation and request for a flexible payment plan if possible. If they don’t budge on the repayment plan, at the very least, they will roll over the loan amount to the next month with a single request that you pay the interest and fees for that month.
Top Title Loan Lenders in the US:
This lender offers motorcycle and car title loans to the tune of $10,000 in less than 30 minutes. The lender has been in operation for more than 15 years and has 1,000+ locations in different states. To top it all off, it has competitive rates and doesn’t charge a prepayment fee.
- Quick turnaround
- Accept bad credit
- Available in many locations
- You must visit a store location to apply for a loan
- The fees are unclear
- Refinancing is costly
What sets Finova apart from other title loan lenders is the fact that they offer a lower APR at 30% in comparison to its competitors. They also offer a car equity line of credit on the loans and have a 12-month repayment term. If you need cash fast, you will appreciate the same day funding policy and the no prepayment fee. Even better, if you have a bad credit score, Finova financial still welcomes you with open arms.
To qualify for the title loan, the car should be lien free, and you should have proof of insurance. Finova Financial is only available in Oregon, Tennessee, South Carolina, New Mexico, Florida, and Arizona.
- Low APR on comparision
- Available to those with Bad Credit
- Long loan terms available
- Only available in a handful of states
- You stand to lose your vehicle
This lender specializes in car title loans. The loan amounts they offer vary by state, the vehicle, and your ability to repay. It offers an emergency loan option of up to $2,500 on your title loan. This is available on the same business day.
- It offers loan amounts of up to $50,000
- The loan terms range between one year and four years
- It accepts borrowers with bad credit
- They repossess the car if you default on the loan
- It’s available in a handful of states
Some Tips for Taking Car Title Loans
Now that you know the pros and cons of car title loans and some of the things they have to offer, below are some tips that will make you a responsible borrower:
You should never borrow more than you need
We cannot stress this enough. Despite experts shouting it on the rooftops, it’s still the number one mistake first-time borrowers make. Just because your car is valued at $10,000, it doesn’t mean you have to take a loan equivalent to this value. Instead, you should let your needs dictate the amount you take. Taking a higher amount and lying to yourself that you will not use it is when you can begin to get yourself into deeper financial problems; you might end up going on a shopping spree with the money and then have to pay back a hefty amount.
Always make early payments or on-time when you can
Every year, borrowers are late on their repayments, and they get threatening phone calls from the same company that was their savior a few weeks back. Title loan lenders and agents can prove to be harsh, especially if you are not forthcoming. If you give them a reason to, they will call your family members, your landlords, boss, and every other phone number you gave them during application just so that they can get to you. The worst bit is that they are allowed to do so, although with some limitations, so be prepared should you be unable to pay on time.
When the worst comes to the worst, it is within their legal right to repossess your car, even if you missed the repayment deadline with a couple of days. To avoid all these problems, you should strive to make early payments. If for some reason, this is not possible, you should always reach out to the lender to explain the situation and come up with a payment plan you agree on.
Pay the loan off fast
As mentioned above, car title loan interest rates can be as high as 100%. Some lenders will give you the motivation to repay it fast by offering reduced interest rates. This means that if you repay the loan in half the loan term, it will only cost you half as much. When taking a loan, your priority should be repaying it fast.
How do Title Loans compare to other Short Term Loans?
Title loans are not the only emergency loans you might have come across, so you are probably wondering how they stack against these loans.
Payday loans are by far the second most popular form of short term loan. The only difference is that while your income determines payday loan amounts, title loans are determined by the value of your car. In many cases, payday loan amounts are lower than title loans, but this is because payday loans are unsecured loans. If you have a good stable income, you can afford to take a couple of thousands, but many providers limit the loan amount to about $2,000.
Depending on the value of your car, you could take as much as $10,000 on a title loan. This makes them a preferred choice for car owners.
These are often given out by independent lenders and some banks. The loans have specific amounts and are repaid within a year, usually six months. They are a great option for those who are not in financial emergencies but still need money within a few days. The beauty of these loans is that their interest rates are lower in comparison to car title loans.
With personal loans, you are often required to provide your credit score, and most lenders will turn you away if it’s not high enough. On the flip side, though title loans are expensive, they do not require you to have an outstanding credit score. In fact, title loan lenders don’t even conduct hard credit checks.
Refund Anticipation Loan
These loans are common when the tax season is getting closer. It is a special type of loan that is issued based on the ability of an individual to repay them out of their tax refunds. Before these lenders offer a refund anticipation loan, they will run preliminary tests to see the amount you are expected to repay and offer a set amount. The main advantage of a refund loan is that you will not have to worry about monthly payments.
But the catch with these loans is that unless the tax season is close, the title loan is easier to get. You might also have a situation where you owe some amount in taxes at the end of the year, which means that a title loan is your savior.
How can you find a Good Title Loan Lender near you?
Believe it or not, title loan lenders are under a lot of pressure to keep their businesses afloat. To do these, they often resort to marketing tactics and incentives which include;
- No penalties for early repayments
- No interest for a specified number of months
- Offer to pay off the remaining loan amount at a low rate
Choosing a good lender will make all the difference, especially when it comes to the interest rate and the overall cost of the loan. Some of the best lenders in the industry are family-owned companies since they are more likely to understand when you are late on repayments. Large lenders have a large customer base and are stricter on their rules.
When you are looking for a title loan lender near you, there are two options you can consider;
- Check who is available locally
- Perform an online search
The easiest thing to do when looking for the best lender near you is calling the lenders directly and comparing their rates. Choosing a lender who has a store location close to you makes it easier to make trips to the store when making a repayment.
Alternatively, you can use lending companies that have a database of lenders. Instead of offering you the title loan directly, they redirect you to other direct lenders in their database. These companies usually do their homework and only work with the best in the industry. Getting you the best title loan is in their best interest if they want to grow fast.
Taking a car title loan is an easy way to get cash when you are in an emergency. Provided you are a responsible borrower and are keen on making repayments on time; you do not have anything to worry about. Just ensure that you read through the fine print before you commit to any lender.
Can I apply for a title loan with bad credit?
Yes, you can. Since you are putting your car as the collateral, your credit score has very little bearing on whether you get the loan or not. If you have a good credit score, you have higher chances of getting a lower APR.
How much can I borrow?
This depends on a couple of factors ranging from the value of the vehicle, the lender in question, if you can afford the loan, the state caps and whether it is your first or subsequent loan. The loan amounts vary from $500 to $50,000.
Do I pay an origination fee?
Yes, you do. The amount you will pay will vary from state to state, so you should check how much the fee is before you commit.
How much does a title loan cost?
Title loans are cheaper than payday loans because they are secured. However, in comparison to traditional loans from banks, they are expensive. The actual loan cost can be 25%, or as high as 165%. The rate you get depends on the credit score and the state you live in.
What happens if I miss my loan deadlines?
You will first be charged lateness fees. However, if you don’t pay for a long time or default, the lender might end up repossessing your car.