Car title loans are quick cash advances that provide emergency funding to consumers who own the titles to their vehicles. A person who is over 18 years of age and has no car title issues may be eligible for a title loan. Many consumers choose this option because the approval process is simple, and an applicant’s credit profile does not have to be perfect. However, some consumers still wonder if title loans are worth it.
The Benefits of a Title Loan
Car title loans have a wealth of benefits attached to them. The best benefit of these advances is that the lenders do not consider an applicant’s credit score. Therefore, people with poor credit have access to loans as long as they do not have any car title issues.
Another benefit of a title loan is that a consumer can receive a larger loan than one that is issued by a payday lender. Title loans are based on the value of the vehicle. Therefore, someone who has a newer vehicle may borrow several thousand dollars.
Finally, a title loan has a longer repayment period than other types of quick cash advances. Title lenders usually allow their borrowers 30 days to repay the advance. Payday lenders have 14-day life loans, which may be stressful for a struggling debtor.
The disadvantages of a Title Loan
Car title loans do have some disadvantages to them. One of the major disadvantages of a title loan is that the lender can potentially repossess the consumer’s vehicle. A title loan applicant must have no car title issues when he or she applies for an advance. The lender will want to place a temporary lien on the vehicle to secure its loan proceeds. The borrower can still have possession of the vehicle during the course of the loan. However, the temporary lien gives the lender the right to take the vehicle if the customer defaults on the advance.
Another disadvantage of a title loan is the annual percentage rate. Some title loans have annual percentage rates that are as high as 240 percent. This does not ring true for all title lenders. However, a consumer must perform research to find a fair offer. Extra fees are something that many car title lenders may add into the process. They may add such fees as documentation fees, processing fees and more. A savvy consumer must read all contract terms before applying for any title advance.
The following restates the pros and cons of title loans:
Pros:
- No credit check
- Large loans
- Longer repayment term than payday lenders offer
Cons:
- Risk of repossession and car title issues
- High APR
- Hidden fees
Are Title Loans Worth It?
Each consumer has a unique situation through which he or he must survive. Something that works for one consumer may not be the best option for another consumer. A person who is considering a title loan must review his or her finances before applying. Many consumers are stuck in vicious borrowing cycles because they did not calculate their disposable income before they took one of these products. Calculating disposable income lets the consumer know whether he or she can handle a short-term advance.
Proper research is necessary to choose the correct lender. A reliable lender will offer fair loan terms, helpful information and transparency. Honorable establishments will post their fees and rates online where consumers can view them.
A car title loan can be worth it for a person who has an immediate financial obligation and no car title issues. It can provide that person with fast cash to handle an emergency. However, a consumer should not take such a product lightly or use it for frivolous purposes.