If you find yourself in need of cash but your bad credit score prevents you from trying your luck with traditional loans, is there any option left for you? Applying for a car title loan may be the best solution to get your hands on some emergency funds minus the lengthy income verification and credit check.
The people behind Utah Money Center share a few things you need to know about this type of financing:
What is a Car Title Loan?
A car title loan, also known as “auto title loans” or simply “title loans”, is a type of short-term loan where the borrower’s car title is considered as a form of collateral in exchange for a certain amount of money. To receive approval, the borrower must be the real owner of the car – the lien holder. Borrowers usually have about 30 days to pay off the loan. Otherwise, the lender takes the ownership of the car, giving them the freedom to sell it to recoup the loan’s amount.
How Does a Car Title Loan Work?
Consider how a pawnshop works. If you bring your jewelry or other valuable items there, the staff member would appraise the items and offer a loan based on the estimated worth of the items you’re trying to pawn. If deemed vaIuable enough, the pawn shop will offer to lend money while also charging interest. If you fail to pay the amount within the agreed period, you will forfeit your items and lose ownership. A car title loan works the same way, only you have your car as the item.
How is the Car’s Value Determined?
In this type of loan, the lender will evaluate the car’s price based on wholesale values. Afterwards, they will offer a loan depending on what they think is your car’s worth. The lender will possess your car’s title until you have finally paid your loan.
Keep in mind that this loan doesn’t work the same way as when you bought your car. This is a short-term type of loan that comes with an interest rate. If you fail to pay back your loan within the agreed time frame, this means that, by default, you’ve essentially sold your car to the lender. So, be mindful of your payment deadlines.