Photo by Grahame Jenkins on Unsplash
People look for loans for different reasons. These can range from starting a new business to addressing an emergency. However, even with the easy availability of borrowing options like an auto title loan, borrowers must understand all the requirements.
For example, anyone looking for Car Title Loans Riverside should study the market. They should also weigh the different available options before settling on one. An auto title loan comes with a lot of benefits for borrowers and is something to go for when you’re in need. However, it is important to take time to study it carefully before you get an auto title loan.
RELATED ARTICLE: MOBILE HOME PARK INVESTING: YOUR NEXT BIG ENTREPRENEURIAL VENTURE?
Your Car as Collateral
One of the important things to note is that auto title loans are issued against your car as collateral. These are short-term loans that come with high rates of interest and processing fees.
Unlike unsecured loans, auto title loans are easy to acquire. All you’ll need to do is provide the title for your car and prove that you own it.
However, because of the high rates of interests and the additional fees, borrowers should consider auto title loans to handle pressing needs only. Most importantly, a borrower should have a reliable source of income to help them repay the loan.
Things to Note About an Auto Title Loan
The application for an auto title loan is short and straightforward. The most important document you’ll need is the auto title. The lender will use this as security for the loan.
Once you have completed the application, you will usually receive the funds within a day. In other words, you won’t have to wait for a long period of time to get approved and get the money you applied for. That’s because title loan lenders don’t usually check your credit score as other lenders do. The amount of the loan you’re likely to be awarded is usually between 40%-50% of your car’s wholesale value.
Nonetheless, even though your car will be used as security for the loan, you will be allowed to use your vehicle as long as you continue to pay the loan.
Before approving the loan, the lender will require an inspection of your vehicle by an authorized agent. The purpose of this inspection will be to determine the value of your car.
After disbursing the loan, the lender will retain the vehicle’s title until the loan is cleared. The lender may also require that you leave them with a set of keys that they will returned to you once you have paid the loan in full.
When to Get an Auto Title Loan
Unless you find it absolutely necessary, don’t get an auto title loan. This is because of the high rates of interest and the other expensive charges that come with these loans.
However, if you feel that an auto title loan is your only remaining option and you have an urgent need, an auto title loan may be your best course of action. Do keep in mind, however, that lenders impose high fees and premiums for these loans. The interest rates are extremely high, sometimes as high as 25% on a monthly basis.
Additionally, assess the possibility of losing your car. The moment you default the loan, the lender has the legal right to possess your vehicle. Generally, they will sell your car at auction to cover the cost of the loan and recover their money.
The lender mitigates their risk by using the borrower’s vehicle as collateral on an auto title loan. This is the reason why the lender is usually not strict about checking your credit rating.
Moreover, it is important to remember that auto title loans are small loans. What’s more, you stand a chance of losing a lot of money if you default on the loan. On the other hand, it is a win-win situation for the lender.
Therefore, because these loans can be so expensive, it is important for borrowers to consider the risks. Additionally, be prepared to lose your car if it becomes burdensome for you to pay back the loan. Therefore, avoid the temptation of borrowing more money than you need. Use it for the sole reason of addressing the emergency issue at hand, and not for luxury purchases.
A Final Word
The ability to access funds through loans is always helpful, especially when one is in dire need. Auto title loans offer such a possibility. However, you should use them for emergencies only.