While you have to be careful when you give up the title to your car in order to take out the loan, if you utilize the loan effectively and make sure you repay on time, an auto title loan can help you bypass a lot of the troubles that come with more common loans. These include credit score checks and your application being rejected because you have bad credit. Also:
It’s cheaper than other types of loans
Pay Day loans and cash advances are more common ways of borrowing money, but did you know they are actually more expensive than most auto title loans? In contrast, taking out an auto title loan will actually come out cheaper due to the interest rates usually being a lot lower. The reason for this is because as the loan is secured to your car, with the vehicle being used as collateral, the lender doesn’t necessarily have to charge a high level of interest as the vehicle already provides them with another layer of security. Therefore, the can get away with offering lower interest rates to help them entice more borrowers and customers.
Quick Repayment Schedules
Most auto title loans are short term, usually no more than 30 days. And you will often get approved very quickly if you meet the criteria. Because of the very slick, quick and streamlined process of it all, you will get a quick repayment schedule. So you will already know in advance exactly how much you need to be paying. Most people generally just pay the full loan when their pay day money arrives. So it can be a convenient substitute for a pay day loan if you do want to take advantage of the lower interest rates. But you will have the opportunity to review and agree the repayment schedule before
Repayment schedules will mostly depend on your income. Auto title loans can be given out in any amount, but cannot exceed the value of the vehicle being put up as collateral. Otherwise, the deal would not be as secure or financially viable for the lender.
There are some drawbacks to taking out these types of loans though. The interest rate, as already mentioned, will start low. But if you keep extending the time it takes to pay back the loan, the interest rates rise to high levels. If you are borrowing a significant amount that you think you cannot pay back in a month, you should be aware that you will eventually end up paying a lot more than you originally intended due to the rising interest rates from month to month.
Also, as you have put up your vehicle as collateral if you default on the loan, there is the possibility and very real risk of you losing your car. The lender will have the right to take control of the title and sell it to the highest bidder. The worst part is that if they don’t manage to sell it for the amount you owe them, you will still be responsible for paying the remaining and still outstanding debt. If they do manage to sell it for more than you owe, they will also keep the profit they made off of your car. This is one of the benefits for lenders and why they offer this service to people they think may struggle to pay it back (poor credit history or low income).
So of course, you need to be smart and weight the risks and rewards. But if you know what you are doing, taking out an auto title loan can be a smart move that will help you through a short term financial problem. If you think an auto title loan is right for you, there are many places locally that can help like title loans San Diego where you can apply for such a loan.