What Is a Car Title Loan?
Friday, October 8th, 2010A car title loan, otherwise known as a title loan or an auto title loan, is a short term loan where the car title is utilized as collateral. It has become a popular source of funds because there is no requirement that the borrower should have a good credit rating and the amount is given to the borrower in less time compared to standard loans. While the interests collected are often higher than those that are charged for conventional sources of funds, A car title loan may be the only way to obtain money when there is a financial emergency. For some borrowers, the benefit is that the companies providing the vehicle title loan do not need to perform a credit check because the title already serves as security for this type of debt. Thus, even people who have no credit scores yet or those who have low credit ratings can apply for a car title loan. Therefore, it could be a vital source of emergency funds for those who have low credit ratings, such as those who have gone into bankruptcy. Another primary advantage is that those who have low credit scores can utilize this loan as a way to raise their scores if they are not late in the repayment of the money and the company informs the credit bureaus. And as long as the borrower has already provided the needed documents, a car title loan can be provided in less than an hour. In addition to a car title, there are other prerequisites for this kind of loan. It is common for the lending company to make sure that the borrower has the capacity to repay the amount and therefore must have a regular income source, such as employment. It must also be shown that the vehicle has been completely paid for if it was purchased through an auto loan and that there no other liens. Meanwhile, the loan amount is dependent on the resale value of the car. Car title loan companies usually provide as must as 50 percent of the vehicle’s resale value, although some lenders may offer a higher amount. The interest rates that are used can vary substantially. Thus, it is often prudent to check the different fees and the interest rate that is being charged. Borrowers should be aware that every state has its own regulations when it comes to car title loans. It is to up to the borrowers to familiarize themselves regarding these regulations and to make sure that the fees charged are legal. Click here for more.
