Sometimes life presses against you hard and you will have to attain a loan to address some problems so you can continue to run your home-based business. Different types of loans are secured and this means you have to give out an asset in case you default repaying the loan. Title loans are secured by your car title and you can get an amount as high as the value of the car. In times of financial hardship, a loan may be necessary to keep your business afloat, and a title loan is a good option.
Before you apply for a title loan, make sure you understand these 10 things.
1. You Risk Losing Your Car
As mentioned above, title loans use the car title as collateral and this means if you are unable to repay the loan, the car is taken to stand in for the debt. Therefore, there is a risk you could lose your vehicle, and in such a case the car immediately becomes a possession of the lender.
2. More Expensive
Compared to other kinds of loans, title loans are more expensive and could be difficult to repay if you don’t have a good repayment plan. It is necessary that you make sure you are in a good financial standing when applying for the loan to prevent situations where you are unable to make the repayment.
3. You Can Use Your Vehicle
When you apply for a title loan you still retain access to your vehicle. You will only give it to the lender if you fail to repay the loan, so this ensures that you don’t lose access to transportation.
4. They Are Short-Term
Title loans are processed within a very short period of time and the repayment schedule you are given is also a short period of time. They also have a short maturity period when you compare them to other long-term loans.
5. No Credit Checks
If you have a bad credit rating, then you can find solace in a title loan as many lenders will not bother to check your credit history. All you need is to provide your car title to secure the loan and if you default they will keep the car anyway.
6. Loan Calculation
The calculation of a title loan is a bit different from that of other loans as you are given an amount based on the value of the vehicle. The lender will inspect the vehicle and estimate the resale price upon which they will base the loan calculation.
7. Eligibility
To get a title loan you have to be 18 years of age or more. You must then offer your car as collateral and agree that if you are unable to repay the loan the car is taken over by the lender.
8. Read the Full Agreement
Different lenders will put varying conditions when giving out a title loan, so it is important to pay attention to the text in small font while applying for the loan. These terms and conditions are what you will have to follow when repaying the loan.
9. Compare Lender Deals
Lenders offer different terms and you should be careful to compare what others are giving instead of settling on the first deal. Shop for a fair deal that gives you good repayment terms.
10. Cheaper Compared to Cash Advance
A title loan is cheaper than a cash advance because there is a physical asset attached to the loan and in this case the lender does not need to worry because there is a high layer of security. Cash advance loans charge higher interest solely because the risk base is wide and there is no guarantee you will get the income to repay the credit.
Before you apply for a title loan, you are advised to pay attention to every single detail to prevent cases where you are unable to make repayment. Title loans are attached to your car as collateral and when you are unable to repay the debt the car is confiscated and sold.
