As soon as a person comes to know about a fast and quick car title loan, he thinks of going for it. However, it’s not the right financial approach. No doubt, taking this loan is quick and straightforward, but one must not opt for it without getting a full understanding of how car title loans work. Yes, this auto loan lets you handle your cash needs real fast, but they can prove very risky if you are not careful. In this post, you need to know about three vital facts related to title loans. Continue reading, know how this loan works, and then borrow with confidence.
Your Car is the Collateral
Collateral means the security of a loan for a lender.No doubt; you can enjoy benefits of a car title loan as it lets you have your hands on the cash you need the most in a short period. However, you need to put your car at risk of enjoying these benefits. This short-term secured loan is known as a title loan as you might not give your vehicle physically to a lender, but you transfer its title to the lender. That means he is the lien-holder of your car. You are borrowing money against the car title, and the lender will hold your title until the time you pay him off the full amount of loan back.
When you opt for a car title loan, the lender will often ask you to provide proof of ownership. It’s available in the form of registration papers. However, you will give this proof by handing him over a set of your car keys.
Inspection and Assessment
Your car’s inspection and assessment is another significant requirement for this loan. If you are applying online, then the lender will ask you to provide him some car pictures. These pictures will give specific information about the vehicle, such as its age, condition, and mileage. Although remote options are available, many lenders like to inspect cars in person.
After inspection, an assessment of your car value will be occurred. In case you don’t own your car outright, it’s when you are paying off your car loan, then the loan amount you get will be smaller. You will borrow against your car equity value; in most cases, 70 percent of equity value will be your loan amount.
When you are the owner, your loan amount is 25-50 percent of its market value. You can’t expect to receive a loan amount for the full value.
Your Car Title Loan is Independent of Your Credit Score
The most significant advantage of going with a car title loan is that the lender won’t check your credit score. Not caring much about credit is that your car is used as collateral, and if you don’t pay them back, then they will repossess it through title and recover bad debt.
You Get Fast Cash But with Short-term
It would be best if you were well-aware of your whole situation. You must know how car title loans work. It’s not like you get the money and payback in five to six months. You need to pay back within a month. So, consider this thing while making your mind about this financial option.