If you are looking for a long term financial solution, you may want to stay away from so-called alternative lending forms. However, the reality is also that title loans are becoming increasing popular. This is because they can instantly solve a potential financial emergency. This has great surface value, as there are also very few requirements to apply for such a loan.
Application Requirements for Title Loans
There are a few requirements for those who want to apply for title loans. These include:
- You must own the vehicle in full, without liens.
- You must have a regular monthly income.
- You must have valid ID.
- You must prove your residency.
- You must be willing to have your vehicle inspected.
This makes car title loans slightly different from payday loans. This is because for a payday loan, you only have to prove that you are receiving an income. A title loan has slightly more stringent requirements.
What Will You Get?
Very simply put, when you own a vehicle title, you can always access a quick source of money, regardless of your credit history. You will generally find auto title loans online, and they are targeted at the sub-prime market. They are a short term solution that usually has to be paid back within 30 days.
Very simply put, these loans are a solution for those people who still have past financial decisions looming over their heads. If you have a poor credit score, it may take as much as seven years before you are able to apply for regular financial products again. Unfortunately, this means that you will have to pay for higher interest rates as well. On the other hand, although the interest rate is high, the loan is usually only in place for a month, so you don’t actually pay that much more.
You do, however, have to understand that these loans are a type of secured loan. Your vehicle is the collateral. If you do not pay your loan back on time, the lender will think nothing of repossessing your vehicle. Another thing to understand is that you will usually only be able to borrow 50% of the value of your vehicle, but if your car is repossessed and sold, you will not see any of the money above and beyond your loan principal. This is because the rest will be used to cover the interest rate, the repossession feeds and the court fees. Furthermore, the note that will be on your credit score after this will be even worse and will make it far more difficult for you to apply for any kind of credit for at least seven year.
Whenever you apply for a loan, regardless of your current credit status, you have to be sure that you will be able to pay it back. If you have any worries about this, you may want to search for an alternative solution. Perhaps it would be better to simply sell your vehicle, for instance.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.