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Car Title Loans 101: All You Need to Know

“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 you can acquire a short-term loan to help you through the month, let’s look at what a car title loan is.

In a nutshell, car title loans San Diego are short-term loans where your car title is used as collateral. It is important to note that to be granted a car title loan, you need to own the car outright. 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:



High interest rates versus short-term cash

Because these loans target people who have a low income as well as 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 the book value of your car. 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.

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 the value of your motor vehicle.

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