Many people who need cash quickly apply for car title loans, which is a short-term loan where the title to the borrower’s car is used as collateral. These loans are often preferred over traditional loans due to the easy application process and fast approvals. But, it’s important to understand the basics of car title loans before applying for one. Here’s what you need to know:
You Must Own Your Vehicle to Qualify
The title to your vehicle is used as collateral for a car title loan, which means you must own your vehicle in order to qualify for a loan. Lenders won’t take your word for it either. You will need to provide a clear vehicle title for your automobile, motorcycle, or RV during the application process. The car title must have your name on it, or your application will not be processed.
The Amount of Loan Depends on the Vehicle’s Value
It wouldn’t make sense for a lender to lend you more than what your car is worth. The loan amount must be less than the value of the collateral, which is why the amount you are approved for will depend primarily on the value of your vehicle.
Other factors—such as your current income—could also impact the loan amount. For this reason, the lender will need to see proof of income and employment during the application process.
No Credit Check
Your credit score won’t affect your eligibility for a car title loan. Why? Car title loans are secured loans, which means they are backed by collateral. Because you are using collateral, the lender won’t need to dig deep into your credit history to determine if it’s risky to lend you money. This is why many people with low credit scores rely on car title loans and other secured loans to get cash.
You Can Still Use Your Vehicle
Using the title to your vehicle as collateral is not the same as giving up your vehicle. If you are approved for getting a car title loan, the lender will not take possession of your vehicle. In fact, the lender will not ever take possession of your vehicle as long as the loan is repaid in full. You can continue to use your car as you please, so taking out a car title loan will not affect your ability to get around town.
You Can Decide How to Spend Your Money
Other types of loans have their own rules regarding how the borrower can spend the borrowed money. But these rules and restrictions don’t exist for car title loans. If you are approved for a car title loan, you decide how to spend the money. The lender who approves your loan cannot tell you what you can and cannot do with the money.
There’s no doubt that a car title loan can help you secure the cash you need quickly. If you apply for a title loan, make sure you understand the terms of the agreement prior to signing on the dotted line.