Car title loans are advertised as a way for those with marginal credit to get a large sum of money quickly. Because the underwriting on these loans is minimal, nearly anyone that has a car can get qualified for a car title loan. According to a Federal Deposit Insurance Corporation survey, roughly 1.1 million households in the United States took out a car title loan in 2013. If you are considering applying for a car title loan, there are some things that you should keep in mind.
Car title loans can be a valuable financial option for those with a poor credit score or a spotty credit history. The loan is secured with the title of the car as collateral. In most cases, there is no credit check to get a car title loan. Residents of Michigan with bad credit can receive a car title loan to help their debt problems. College students that have just started establishing their credit can apply for a car title loan to pay their expenses.
The amount of money that you will be able to receive as a loan will vary depending on the type of car you drive. When a car title loan company is considering your application for a loan, they will want to view the underlying collateral – your car. The company representative will inspect your car to determine its approximate resale value. After the inspection, they will provide you with a loan amount that is a percentage of that value. This ensures that they will be able to recoup their losses if you were to default on the loan and the company assumes ownership of the vehicle.
The amount of time you have to repay the loan will also vary. Car title loans typically have repayment terms of between one month and two years depending on the size of the loan and the state where the loan was originated. Larger loans naturally have longer repayment terms in most areas, however some states have mandated that short term loans have repayment terms that are no longer than three to six months.
You can get a car title loan either online or from a local lender. Once the loan application has been completed and the required documentation supplied, the loan will be issued to you as a check or as a direct deposit into your bank account. Be sure to read all of the terms and conditions of the car title loan before signing so you know exactly what you are agreeing to.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.