For many motorheads, a car means freedom to “do as thou wilt” (within specified speed limits and other regulations, of course). For others, it can mean salvation from financial struggles, including those associated with starting a new business. You might be wondering how a car could be the answer to such dilemmas, to which we answer: a title loan!
Title loans are secured funding options that enable borrowers to use their vehicle as collateral. This vehicle is usually a car, so we’d normally speak of an “auto title loan” or “car title loan.”
The loan amount will hinge upon a myriad of conditions. Moreover, you can typically obtain between 25% and 50% of your vehicle’s value. You’d be surprised at how much you’ll be able to borrow, especially if you own an expensive ride. What’s more, you get to keep using it as long as you don’t default.
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Title Loan Amounts
The average loan amount can range from $1,000 to $5,500. However, depending on the state, you can get up to a whopping $25,000!
Speaking of averages, let’s provide some examples:
In Arkansas, the average amount is $1,500. Meanwhile, in places like Florida or Arizona, you could expect to get anything above the $2,000 – $2,500 mark.
In California, borrowers are oftentimes required to take more than $2,500 because, according to state law, interest rates are capped up to that amount.
Some states rule that title loans should not exceed a certain threshold. To illustrate, Illinois places a limit of either $4,000 or 50% of the borrower’s income. Mississippi is even more stringent, reducing that limit to $2,500 irrespective of income.
How the Title Loan Amount Is Determined
To determine your title loan amount, the lender will assess various factors.
Many relate to your vehicle’s specifications: its make, model, age, mileage, trim level, and condition. This will give them an estimate of your car’s value. In ordinary circumstances, the lender would inspect the vehicle in person. However, in more recent times, some lenders have allowed applicants to send pictures of their cars.
Another ingredient that goes into your loan appraisal is your equity. This results from subtracting the amount you owe on it from the car’s resale value. Most loan companies give up to a certain percentage of this equity.
Your income plays a crucial role in this evaluation, too. Lenders may entrust borrowers with a higher amount depending on how much they earn on a monthly or weekly basis, as that would give some degree of assurance that they’ll pay back in time.
Lastly, some creditors have specific policies on how much they can lend based on their own risk assessments.
How to Maximize Your Title Loan Amount
If you want to get the most amount from your car title lender, below are some tips you may find helpful:
Clean and Maintain Your Vehicle
Your car is essentially the main driver (pun intended) that pushes the loan amount upward. For that reason, cleaning and maintaining it should be your top priority. Check the brakes, transmission, and transfer case, among other things. Also, don’t forget to perform proper oil change when due.
Provide Proof of Income or Bank Statement
Bank statements are powerful trust-building tools. They give creditors a good idea of your spending habits and whether you have enough financial discipline to handle large chunks of money.
Negotiate with the Lender
Some lenders offer negotiable terms. If you’re willing to repay at a higher APR or in a shorter timescale just so that you can enjoy a higher amount, let your lender know and see what comes out of that.
Risks of Borrowing Too Much
Many borrowers end up struggling because they fail to manage their debts appropriately. Moreover, car title loans can be hazardous to debtors’ financial health. This is because they tend to have much higher interest rates than other types of loans. What’s more, you have a shorter window to sort out your debt.
Understandably, people with bad credit resort to these loans for quick cash. If you’re in that type of situation, make sure only to borrow the amount you really need and solely in emergency cases. Avoid borrowing money to buy luxury goods.
Likewise, if you only wish to rebuild your credit score, a title loan is hardly the best alternative.
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To Wrap This Up
Here are the main takeaways from this (hopefully) informative article:
- Title loans are secured loans that can save you when you’re in a financial pickle that needs urgent attention.
- The amount your creditor will grant you will depend on their lending policies, the value of your vehicle, your equity, and your income.
- Some states limit the amount of money you can borrow to protect you from potential predatory practices.
- You can try to get the highest amount possible by keeping your vehicle in check, providing proof of income, and/or using your negotiating skills.
- Ensure that the amount you take is enough to cover the necessary expenses, and don’t spend it on items you don’t need.
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- Dumesle, D. (2023, April 26). How much can I get for a title loan? (Answered). Sound Financial. https://soundfinancial.com/personal-loans/title-loans/how-much-can-i-get-for-a-title-loan
- What To Know About Payday and Car Title Loans. (2022, May 12). Consumer Advice. https://consumer.ftc.gov/articles/what-know-about-payday-and-car-title-loans
- Trusts, P. C. (2015). Auto Title Loans. The Pew Charitable Trusts. https://www.pewtrusts.org/en/research-and-analysis/reports/2015/03/auto-title-loans