Everything you need to know about getting a title loan
If you want to get a title loan, you need to be prepared for anything. From underwriting to loan terms, it can be difficult to know exactly what you need to know to get the best deal.
Obtaining a Title Loan – The Basics
A title loan is a type of short-term personal loan with flexible terms. It is commonly used for financial emergencies such as car repairs or unexpected medical bills. For these types of loans, the borrower uses their vehicle title as collateral.
These types of loans are also more common in areas where other types of traditional lenders may not provide the loan amount requested.
In this post, we’ll go over what you need to know to get a title loan and the best way to get approved quickly.
How to take over a title loan
One of the most important decisions you will make when considering a title loan is underwriting. You need to know how much you can borrow and what your collateral is worth.
If your title is in good condition, it’s usually worth between $42,000 and $44,000. To calculate what your car might be worth, you need to find the average trade-in value on sites like Kelley Blue Book.
Additionally, if you have liens against the car, it may not be worth as much as an unencumbered vehicle.
Before applying for a title loan, check with your lender about the current market value of your car so you can properly underwrite and understand the terms of the loan.
The Types of Title Loans
Title loans are secured loans against the title or lien of a car. They are used for short-term cash needs such as emergency bills and vehicle repairs.
There are two types of title loans: secured and unsecured. The difference is that with an unsecured loan (like a car), you don’t provide the lender with collateral in exchange for the loan.
With a secured loan, you provide collateral in exchange for the loan. For example, you could have your bank or vehicle title as collateral instead of giving your car as collateral.
Another difference between secured and unsecured loans is that you do not have to pay any interest, whereas with a secured loan, you have to pay monthly interest on the amount owed until it is repaid. are often used interchangeably in discussions about title loans.
The Terms of a Title Loan
The terms of a title loan are significant, so make sure you understand the basics. Below is a list of key terms you should be familiar with before getting a title loan.
Fees and Taxes
It is important to note that there are two types of title loan-related fees: the loan origination fee and the monthly processing fee.
The purpose of the lending fee is to cover the cost of underwriting your loan, including third-party verification of your income and assets, credit checks, collections, and other steps. The interest rate on this type of loan is variable, but typically starts at 1 percent.
The monthly processing fee is a flat fee to cover the costs associated with administering your loan. These fees vary by state and can be as low as $1 or as high as $30 per month. Therefore, it is important to shop around for a lender to find out what you will pay for a title loan.
Title loan time frame
The timeframe for obtaining a title loan may vary depending on the lender. Most of the time it takes about 24 hours to get a loan. However, some lenders may take a week or two to approve your application.
This is because a lender needs to do more underwriting and research to ensure you qualify for the loan.
The last thing they want is for someone with bad credit to get a loan and not be able to pay it back. Because of this, it’s important to research your options before contacting your local bank or credit institution.
To find out if your local lender offers title loans, call them and ask about their interest rates, terms, and other borrowing options they offer, like payday loans or bank overdrafts.
Interest rates and duration of the loan
Title loans are short-term loans that can range from a few weeks to several months. The length of the loan depends on your credit rating and other factors, so you need to understand your options.
Interest rates on loans typically start at 30 percent, but can go as high as 60 percent, depending on creditworthiness and other factors. That means you could end up paying $600 on a $500 loan if you don’t repay the loan on time.
The interest you pay depends on the amount of money borrowed and the length of the loan. However, it is important to note that since lenders use risk analysis software when underwriting a title loan, interest rates are not fixed for different borrowers.
Title loans are an alternative to traditional loans because they allow you to borrow money without having to provide collateral. If for any reason you are considering a title loan, think about the risks and benefits before beginning the process.