What do you need to get a Title Loan?
Secured loans are those that require a collateral against the money borrowed. This decreases the risk of the lender in case the borrower fails to pay back the loan. In case the collateral is a vehicle, it is known as a car title loan or simply as a title loan.
Title loans are popular for two reasons. Firstly, they don’t require a credit rating for the applicant to qualify for the loan and secondly, the general requirements are also less strict so it is quite easier and quicker to get approved. Some people will get a loan approved for as low as 100 dollars.
Working of Car Title Loans
People typically take out a car title loan of 1,000 dollars. Of course, the amount can go higher depending on the needs of the borrower. The loan is available from a lender that specializes in title loans or car loans. The loan is provided on the basis of the total value of the car. The lender will offer up to 25 per cent of the total value of the car. As a collateral, the lender will keep the title of the vehicle. The loan can be paid back as a single payment or a 2-year installment plan can be devised.
When the loan is not paid back, the lender has the right to possess the car immediately. Although, they might offer the option of paying interest-only payments for 1-month periods to a borrower who is in default. This rolls over the loan amount indefinitely until the entire amount is repaid.
Requirements of a Car Title Loan
As mentioned before, the eligibility criteria for car title loans are much less strict as compared to other similar loans. Here is what you need to qualify:
- Of course, you must have a car to your own name. Some lenders may provide a loan even if you don’t possess the title. They will loan the money on the equity of the vehicle
- You should have proof of monthly income. This determines for the lender if you can pay back the borrowed money
- You will have to show a government-issued identification. This could include a driver’s license or state ID card
- A lender may ask for personal references
Car Title Loans Application
One can apply for car title loans through typical private lenders like banks or apply online. Many people prefer applying online because it offers more convenience. This is quite popular among people who need a small amount of money against their car. Online direct lenders are easy to find but you may have to compare to finalize one.
Car title loans are feasible if you have credit problems. Bad credit or no credit is often a hindrance to applying for loans as it proves the individual’s ability and responsibility to pay back the borrowed money. However, successfully completing a car title loan with a lender will add it to your credit report. Do know the risks before applying.