Things to consider before taking a car title loan
Title loans are simpler, quicker, and more accessible than the vast majority of other types of credits, which makes them fairly appealing to people looking for easy money. The procedure is simple, and in most cases, your actual credit history is of no significance.
Today we’re going to talk about what a car title loan is, what are the benefits of taking one, and the things you should keep in mind before ultimately signing the paper.
The nature of car title loans
A title loan is a bilateral contract that obliges the lender to lend a certain amount of money to the borrower, who is obliged to return the full amount at a specified date in addition to securing the loan with their car as collateral.
The main prerequisites of such a contract are that your car is not burdened by another loan (regardless of the type) and proof that you own the vehicle.
Similar to most bilateral contracts between individuals, the lender is free to determine the conditions as long as they do not conflict with the state’s laws and moral codes while the borrower can either accept or refuse the terms. However, it’s often the case that the two parties collaborate on crafting the contract and adjusting the terms, although this varies from form to form.
Benefits of taking a car title loan
Car title loans offer easier accessibility than most types of asset-based, payday, and credit loans for a variety of reasons, including:
- Irrelevancy of the individual’s credit history – most lenders aren’t interested in your actual credit history, as they can be certain they will get their money back by repossessing your vehicle
- Simple legal nature – you don’t need a lawyer to interpret the complex legal terms and norms, which will save you quite a bit of cash from the get-go
- Immediacy – car title loans are often approved within the next couple of days of signing the contract
- Short-term contract – this type of loan is typically designed to last a month (or a few), which gives you the opportunity to approach a different contract with another lender once the initial contract expires
- More beneficial than most loan-type contracts – the borrowing limit that is typical for car title loans is several times higher in comparison to most similar contracts
Things to consider before taking a car title loan
Given the many benefits that this type of contract offers, most people who’ve never signed one may think it’s an excellent opportunity to get quick money without risking much. Unfortunately, car title loans usually result in roll-over contracts (Repetitive loans that cover previous contracts).
The statistics, as far as the USA is concerned, tell us that more than 50% of people lose their vehicle due to repossession annually, mainly due to the fact that the debt needs to be repaid in full.
Failing to do so results in repossession, although you will be able to re-apply for another car title loan to fulfill your obligations from the first one. That’s why you should always pay attention to the following things before taking up a car title loan:
Find a credible lender
While the vast majority of lending companies work within the bounds of legality, quite a few names prey on people who are desperately looking for a quick cash bump. Even though there are numerous parameters by which you can evaluate a company, the easiest way is to look at interest rates.
For instance, a company that is willing to give you 50% loan on your $20,000 Chevrolet can help save your house, but on another hand, if the interest rate is 25%, you’ll essentially lose $5,000.
A good way to determine the credibility of a lender is to take a look at their longevity in the business. New companies are emerging on the market every other day, and it’s easier than ever to fix up an attractive website with persuasive content.
Negotiate if possible
Essentially, loan companies typically deal with contracts by approach, which are essentially fixed, unchangeable forms where negotiations are impossible. However, even in the most rigid forms there may be a hole or two where you can try fighting for more lucrative terms on your side.
Before entering the contract, point out that you’ve been visiting other loaning companies and that you’re not in a hurry whatsoever.
The supply and demand in the loan market is massive, but most companies wouldn’t want to miss out an opportunity to gain potential clients.
Consider joint contract application
Joint contract applications are far from typical, but certain companies approve of them. Basically, in this situation the borrower can approach the contract with another individual (a friend or a family member, for example) in order to improve the likelihood of fulfilling their obligations.
The end result of the contract remains the same; the borrowed money needs to be paid in full, and the obligation is considered as singular (it doesn’t divide on equal parts between the two applicants). Instead, the company will still be able to repossess the car if the payment isn’t delivered in due time, but the initial applicant can turn to the subsidiary applicant for help.
Obviously, the applicant can borrow money from any third party anyway in order to fulfill the obligation; the point of joint application is to have another source of reassurance should the case get to the court.
Don’t borrow unless you can afford it
Even though the main idea of approaching a car title loan is to get the amount of money you need but don’t have, it’s always better to search for other alternatives if you aren’t absolutely certain you can fulfill your end of the bargain.
Quite a lot of people lost their cars and ended up in a loop of sub-contracts that resulted in heftier and heftier obligations simply due to the fact that they’ve missed their first deadline.
If you’re not prepared to forfeit your vehicle and to pay more than you’ve borrowed, it’s not particularly wise to sign a car title loan contract.
We hope that this guide was of use to you today and that you have learned something new about taking a car loan and feel more confident about the next step. Make sure you are staying safe in these times we are all going through and have a good one, guys!
