Title loans are an option that many people turn to when in need of quick money. If money is tight at the moment, but you still need something that costs more than you currently can afford, then a title loan might be just what you’re looking for. However, before making any sort of financial decision, it’s important to learn as much about it as possible. This way, you can make an informed decision and know what to expect.
With that in mind, here are 4 key things you should know about title loans.
1. How Do Title Loans Work?
A title loan may sound confusing, but it’s actually very simple. As the financial professionals from FaceTheRed explain, title loans are a very useful and popular way of taking out a loan, so it’s important that you understand the agreement and how it works. When you take out a title loan, you are borrowing money against the value of your vehicle. That means that you still have full ownership of it but nothing else until the loan is paid back in full. The process takes only 1-52 days, and if approved, the money will be deposited into your account. You then post a small amount of collateral that usually amounts to about 10% of the total value of the car. For example, let’s say you were going to borrow $5,000 against a vehicle worth $10,000. The bank would retain ownership of the vehicle until the loan is paid back. Title loans can be used for any reason you need money- everything from medical bills to major car repairs. However, before taking out a title loan, make sure that you will have enough time to pay it off in full- failing to do so could mean losing your car.
2. When Should You Get A Title Loan?
There’s a good reason why many people choose to get a title loan when they need fast money. If you need something that costs more than you can afford, and you don’t have the time or patience to wait for things to fall in your lap, then this is an excellent option. However, remember that like any other loan, it’s always better to only get one if you really need it. A medical emergency definitely warrants a loan, as does an unexpected home repair. On the other hand, if you’re just looking to treat yourself to something new, it might be better to save up for that or wait until you can afford it without getting into debt. As long as you have a steady source of income that will allow you to pay the loan back in full, it’s okay to get one.
3. The Main Benefits Of A Title Loan
The main benefit of a title loan is the fact that it allows you to get money immediately. When you need something right away, this can be a huge relief. It’s also helpful because it doesn’t require good credit, meaning that even if you have less-than-perfect credit, you can still get approved for a loan. This is often considered one of the main benefits of title loans since most other ways of borrowing money are dependent on your credit score. Since many financial institutions will simply refuse to lend money to someone with bad credit, title loans really do offer a good option for people in that position. In addition to this, most people who have been approved for a title loan maintain full ownership of their vehicle. The only difference is that it is in the possession of the bank until the loan is repaid in full.
4. How Much To Borrow?
Part of this is going to depend on what you need the money for, but there are some general rules. For example, if it’s an emergency repair with a high price tag that you absolutely have to have taken care of right away, you’re probably better off just borrowing as much as possible- that way, you can deal with any unexpected emergencies without worrying about how you’ll pay for them. On the other hand, if it’s something that you can hold off on and save up for, then try to keep your loan as small as possible. If you are approved, the bank should provide you with a maximum amount to borrow- unless you have no other choice, it’s always better to go with a lesser amount, simply because the repayment terms are usually relatively short.
There are many reasons to get a title loan if you need instant money- whether it’s for an emergency maintenance repair or just something small that you decide you want to do. If you have any concerns about your credit score, remember that they don’t check that when approving your loan, only your ability to pay it back.