Car title loans are a quick solution when you need cash, and your bad credit doesn’t allow you to use your credit card anymore. Getting a loan with your car title is fast and doesn’t require painful procedures.
In most cases, you can do the paperwork online and have the money you need by the end of the day — supposing you live in a state where these loans are allowed. For example, you can get a car title loan in Riverside in less than a business day. But, if you live anywhere in Colorado or Florida, you need to find an alternative source of money on the fly.
However, a car title loan can have negative consequences if you can’t pay off your debt. That’s why it’s better if you evaluate your budget before securing the loan with your vehicle. Here are six things to consider when getting a car title loan.
Does The Lender Accept Cars Like Yours?
Getting a car title loan is easy, as long as you own the right car. Most lenders only accept vehicles manufactured after 2000. However, sometimes you can get cash with a car from 1995.
Another element that can influence whether you are accepted or not is the mileage of your car. Some title loan lenders have restrictions that include a mileage under 100k, depending on your vehicle’s brand and model.
Make sure you have all documents to obtain the loan fast. It would help if you also had full coverage insurance for the entire period when your vehicle secures the loan.
APR refers to the annual rate you’re going to be charged for the service. It’s the indicator that allows you to measure how expensive the title loan is compared to other loans.
Your lender should write the interest rates, all the fees that come with the loan, and the APR in your contract. Car title loans cost less than payday loans, for example. But, they’re still a lot more expensive than credit cards, as their APRs can get as high as 300%.
As a guideline, 36% APR is the upper limit for ‘affordable’ loans. Everything higher than that, and you risk being dragged into a cycle of debt. Remember that if you can’t pay off your credit, you can lose your car.
What Payment Options Do You Have?
When getting a loan, you should pay attention to what payment options you sign for. Lenders give you various possibilities, from paying in person or online to paying directly from your paycheck.
Before signing the contract, make sure you know how long the loan would last. Plus, it’s essential to have a clear image of what amount you must pay each month and when the lender expects you to make these payments.
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It’s important to check that your monthly payments include a part of the principal. This way, you make sure you pay off your debt by the end of the contract.
6 and 11% of people who secure their loans with a vehicle end up having their cars repossessed.
Do a realistic budget to check if you can keep up with the monthly payments. If you risk getting in a vicious cycle of “rollover” loans, you should look for other sources to get the cash — such as your family or a close friend. This way, you end up paying less to clear the debt, as there are no financial costs added to it.
Is Your Expense That Urgent?
Whether you need the money to cover regular bills or an unexpected expense, you must analyze if borrowing the money using your car is the right decision.
Trying to postpone current payments could be a wiser solution than running to the first car title lender you hear about. Please discuss with your creditors, explain your current financial situation to them, and try to come up with affordable solutions.
You can also find a credit counseling service in your community that can help you get out of debt.
If your expense is urgent, make sure you choose a trustworthy lender. An agency that takes the time to discuss the process and explain all your options. Your lender should give you complete information about your right and responsibilities, together with a detailed payment plan.
A car title loan can get you out of trouble when you’re in desperate need of money. To keep things that simple, you need to find the right lender. This way, you’re more likely to pay off your debt and don’t risk losing your vehicle.