Home Articles Car Title Loans: Three Things You Need To Know

Car Title Loans: Three Things You Need To Know

Car title loans are specifically designed for those who need quick cash to pay bills, cope with an emergency or manage debt. If you owe very little on a certain vehicle or own it outright, a car title loan – also called “fast auto loan” – is fairly easy to get. However, fast and easy is sometimes too good to be trusted. You’ll end up paying high fees for this kind of loan, and losing your car is also a risk.

Before you drive away with a decent car title loan, here are three things you need to know.

Get Started

  1. If you want to obtain car title loans Miami, you have to own your car or at least have equity in it.

In other words, a car title loan is basically a small secured loan that often uses your car as collateral. Typically, car title loans range from $100 to $5,500, which is usually an amount equal to 25-50% of the car’s value. Often, the loan term is short; only 15 or 30 days. And while it’s known as a “car” title loan, this kind of loan also applies to other vehicles, such as motorcycles and trucks.

If you want to obtain a car title loan, the requirements are a clear title – that’s 100% ownership of the vehicle, without any liens – or some equity in your car.

Common Question

What is Equity?

Equity is the asset’s value, such as a home or car, minus all debts you owe on that particular asset.

“Title pawns”, “title pledges” or “pink-slip loans” are other common names for car title loans. The term “pink slip” basically comes from the pink paper that California’s car titles were once printed on.

Typically, the lender will not only want to see your car title, but also your proof of insurance, a photo ID, and your car.

When you get approved for a particular car loan, you’ll issue your car title to your lender in exchange for that loan. It’s until you pay off the loan that you will get your title back.

  1. Car title loans have high-interest rates and fees

When it comes to a car title loan, it’s very common for lenders to charge an estimated 25% of the loan amount every month to finance the loan. If you obtain a 30-day car title loan for about $1,000, for instance, the fee is 25% ($250), and you’d have to incur $1,250, plus any extra charges, which will pay off your loan at the month’s end.

This translates into an APR, or annual percentage rate, of more than 300%. Generally speaking, that’s significantly higher compared to many other forms of credit, such as credit cards. If you obtain a car title loan, your lender should tell you the APR and the overall cost of the loan. Indeed, you could compare this information with other lenders to assist in finding the most suitable offer for you.

  1. You could lose your car if you fail to repay your car title loan

When you obtain a car title loan, and you fail to repay the specific amount you borrowed, together with all of the fees, your lender may rollover your loan into a new one. Once you do this, you’ll be adding even more interest and charges onto the amount you are rolling over.

For example, you might have a $500 loan and a $125 fee. You are unable to pay the whole amount back when it comes to the end of the 30-day term. You decide to pay the $125 fee and then roll over the original $500 into a new loan that has a 25% fee.

When you pay off your new loan, you’ll have paid an overall cost of $250 in fees on the original $500 you borrowed. When you continue rolling over your loan, you might end up in a cycle of extra fees that makes repaying the lender a daunting task.

The lender could actually repossess your car if you find yourself in a scenario where you’re unable to pay off the debt. And you may end up paying even much more in fees to obtain the vehicle back, together with the past-due amount.

Simply put, if you can’t pull this together, then you’ll be left scrambling to look for (and pay for) other means of transportation.

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here