Car title loan is a type of a loan where borrowers can use their car title as a collateral. When a borrower gets the loan, he not only allows the lender to place a lien on his car title but also temporarily surrenders the hard copy of their car title to the lender in exchange for a loan. These types of loans are usually short-term and they have higher interest rates, unlike other loans. When the loan is repaid in full, the lien placed is removed and the car title returned to the owner. However, if the car owner (borrower) defaults the loan, the lender has the right to repossess the car and sell it to repay the outstanding debt.
If you are considering getting a car title loan, you should research more about the loan and the lender to determine whether it’s the right course of action. In addition, read and understand more about the terms of payment to avoid defaulting on your loan.
These 5 steps can help you get the money you urgently need:
1. Apply for the loan online or in person
This is the first thing you should do because no one knows whether you want a loan or not. There are different ways through which you can apply for the loan. You can either do it in person by visiting relevant offices or apply online through a website. You should make sure that the site you are using is reputable to avoid sharing your information with third parties. Alternatively, if you have any queries, you can contact customer service from the contacts on the website and get further directions.
2. Receive a pre-approval estimate
In most cases, this type of loan does not consider your credit score. Therefore, you don’t have to be worried if you have a poor credit score or you’re bankrupt. After submitting your application, you will be contacted by customer service personnel through an email or a call to inform you that you’ve been successful. The specialists will set up a time depending on your convenience to fund the loan. You should know that interest rates vary depending on the state you live in but they mainly vary from 80% to 204% depending on the lender, the amount of money you need and your payment plan among other factors.
3. Gather your documents for funding
You will be required to have your original documents before you receive the cash to identify yourself and guarantee the lender that you are the legal owner of the car. Some of the documents required are:
- Your car title – the title should be in your name although even if it bears another person’s name you might use it to get a loan
- Valid driver’s license or government-issued identification
- Proof of residence – you just need a utility bill
- Proof of income – if you are employed a check is enough while a bank statement is required if you are self-employed. However, if you don’t have any of these, you just need to have a way of proving you get income
4. Take pictures of your car
You will have to take several pictures of your car. It is advisable to do it using natural light and take pictures from multiple angles. These pictures are important to show the current condition of your car, your car model among other details your lender may need to know.
5. Sign the loan and take the money
All is left for you to do is sign the loan agreement and take your money. You can choose how you want to receive the money depending on how and when you want to use it. Since you own the money borrowed, your lender should not bother knowing how you want to spend the money. The only thing that remains is to follow the payment agreement because you’ve signed a contract with the lender.
Taking a loan using your car as collateral can help you especially when you’ve financial crisis and you need urgent money. However, you should have a strategy on how to pay the loan to avoid risking losing your car. You can pay the loan early if you get the money or repay as planned. Finally, if you are to get this loan, take your time to learn more about it, the lender, payment schedule and interest rates to help you choose a reputable lender and negotiate for a better deal.