“Never spend your money before you have it.” – Thomas Jefferson.
As much as we believe in the principle quoted by Thomas Jefferson, the harsh reality is that we live in a world where costs are increasing exponentially and wages are stagnating; therefore, it is becoming harder to make ends meet every month. Consequently, it is becoming more common to find that many people need a small cash injection to get to their next pay date. Unfortunately, it is also evolving into an everyday fact that a significant number of individuals no longer have a decent credit rating; ergo, no bank or traditional financial institution will lend them money.
Is this you?
What are car title loans?
Before we look at ways to acquire a short-term loan to help you through the month, let’s look at what ais.
In a nutshell,are short-term loans where your car title is used as collateral. It is important to note that you need to own the car outright to be granted a car title loan. You cannot get a loan against your vehicle if you still owe anything on your car. Therefore, a car title loan is one option you can use to fund yourself until your next pay date.
Advantages and Disadvantages of a car title loan
As with everything, there are always pros and cons attached to a car title loan. Therefore, here are some of the advantages and disadvantages:
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High-interest rates versus short-term cash
Because these loans target people who have a low income and a bad credit rating, the risk to the lender is considered high. There are two ways that the lender can mitigate the risk of losing the loan amount: He takes the car title as collateral, and he charges very high-interest rates. In other words, if you take out a car title loan, you hand over your vehicle’s title deed, and you agree to pay an exorbitant interest rate. Once you have paid the loan amount back, including interest, you will be given your cars’ title deed back.
Short-term loan of between 30% to 50% of the value of your car
Most financial institutions who offer car title loans will lend you no more than 50% of your car’s book value. Therefore, if you cannot repay the loan, the institution can sell your car, recover the loan amount, and make an additional profit. This sounds unfair; however, if you look at it from a business perspective, the risk needs to mitigate by high-interest rates, etc.
Furthermore, most of these loans are repayable within 30 days of the receipt of the loan amount.
The quick and easy application process
It can take as little as 15 minutes for your loan application to be approved. This is because the lender is not interested in your credit record. The fact of the matter is that you are loaned the money based on your motor vehicle’s value.