A car title loan, which is also known as an auto title loan or a title loan, is a short-term loan that is provided whereby the collateral is the car title. This is a source of funds that has become popular because the borrower does not need to have a good credit rating and the money is made available in a much shorter time than conventional loans. While the interests collected are often higher than those that are charged for conventional sources of funds, car title loans may be the only way to obtain money when there is a financial emergency.
An important advantage is that the companies offering the vehicle title loan do not usually conduct a credit check because this particular kind of debt is already secured by the title. Thus, even people who have no credit scores yet or those who have low credit ratings can apply for a car title loan. Thus, it may serve as one of the sources of emergency funds that are available to people with low credit scores, including those who have filed for bankruptcy.
Another benefit is that people with poor credit scores can also use this kind of debt to enhance their credit score as long as they repay the loan on time and the company reports it to 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 amount made available is based on the car’s resale price. Title loan companies usually provide as must as 50 percent of the vehicle’s resale value, although some lenders may offer a higher amount. It should be noted that interest rates can differ substantially. Thus, it is often prudent to check the different fees and the interest rate that is being charged. It should be noted that each state has its own laws governing car title loans. Borrowers need to educate themselves on these laws to ensure that the fees collected are legal.