What is a title loan and how does it work?
Picture this: You pay your bills on time and break even on your budget. You don't have any extra money in your bank account because you're living paycheck-to-paycheck after taking over the mortgage on your home. Unfortunately, a water line gets damaged and you now have water leaking into your bathroom.
You don't have the money to fix the leak, but there's no way you can let it go until your next paycheck. Your only option is to take out a title loan on your car, but you don't understand what that entails. So, what is a title loan?
Keep reading to find out what a title loan is and how it works.
What Is a Title Loan?
A title loan is a loan that implements the title of a vehicle as an incentive to repay a loan. Car title loans are high-interest loans that must be paid back within a certain time frame. If the loan doesn't get paid back, the title is not returned and your car will be taken as collateral.
Title loans are convenient because they don't usually require a credit check. It is simple and easy to get approved assuming that your car is worthy of the loan.
Title loans require that you own your vehicle and have no outstanding balances on it. The lender may find it necessary that you give them a set of keys or have a GPS tracker installed on your car as a means to access your vehicle if you don't pay back the loan.
How Do Title Loans Work?
To be considered for the loan, you have to find a title loan company to approve it. When applying, you may be required to show the lender the following:
- Vehicle title paperwork in your name
- A valid photo ID
- Proof of income
- Proof of residence
- Photos of your vehicle
These documents will determine whether you are approved or denied for the loan and how much money you can borrow.
If you are approved for the auto title loan, the lender keeps the title to the vehicle in exchange for the loan. The lender may find it necessary that you give them a set of keys or have a GPS tracker installed on your car as a means to access your vehicle if you don't pay back the loan.
On top of the amount of the loan, you will have to pay a fee for borrowing the money. Title loans tend to have higher interest rates than other types of loans. If you can't make your payments and you default on the loan, your car will then be repossessed by the lender.
The great thing about title loans is that you can keep your car in your possession while you are paying off the loan.
Do You Need to Apply for a Title Loan?
What you've read so far has answered the question what is a title loan? Now that you know what a title loan is, your next step might be acquiring one.
To do this, you must contact a lender via an online website or through a store that provides title loans to discuss your options. There are quite a few title loan companies in your area.
If you're in a pinch, reach out to one today for your title loan needs! For more helpful content like this, keep browsing our site.
