Whether you are experiencing a financial emergency, or you have recently fell victim to unemployment like many Americans, the availability of fast cash is very important. With banking institutions and lenders across the nation trying to spur spending, there are many more options for potential borrowers to review. If you have attempted to obtain an unsecured personal loan or cash advance with no avail, you may want to consider other avenues including title loans. If you own a vehicle outright, a personal loan against car title could be the perfect choice for you to receive the necessary funds to pay rent or unexpected bills. There are things you must know before proceeding with any loan.
Title loans are very similar to secured loans; in that they are both require collateral in the event that the loan goes into default. The only difference between a title loan and secured loan is that the title loan specifically requires a private passenger or other type of vehicle to secure the loan. Some secured loans involved a vehicle, however, these are typically vehicle financing loans in the event you are purchasing a new or used vehicle and need to funds to do so. While you are receiving the money you need to purchase a vehicle, you are given no money in hand. Title loans allow borrowers to utilize their vehicle during the loan term; however, the lender will require holding the title in the event they do not receive adequate repayment.
While these loans may sound tempting if you need cash fast, you must consider the pros and cons of a loan against your car title before signing on the dotted loan. If not maintained properly, you will find the very loan that got you out of hot water, assisted in getting you back in. Before you accept a loan offer, make sure to review all alternative options. Can you ask a friend or family for the needed money? Can you receive a personal unsecured loan? Alternatively, can you simply manage without the money? If the answers are no to all of the above, then it may be a financial hardship that requires this solution.
Lenders will determine the maximum amount that can be borrowed against a vehicle base on the vehicles fair market value. While many will be surprised how low the value is, keep in mind that this value is not the retail value however the value a private party would receive if selling the vehicle. Most amounts will range between $1000 and $2000, however can range up to $10,000 on newer cars and luxury vehicles.
The loan interest rate is not federally mandated; rather the allowable interest varies state by state. Although the rates vary, do not be fooled- they are high. Each Attorney General will regulate interest rates, however, because car title loans are frowned upon, the rates will be exorbitant to steer people away from this form of lending. States such as Florida, allow a whooping 30% per year for loans under $2000. Yes, 30%, sounds like highway robbery right? Well, this has been creatively described as a form of legalized car theft, just to give you an idea of the views of financial experts.
Another downfall of these types of “car pawns” is, that no matter how much you borrow, if you fail to make just one payment you lose your entire car equity to the lender. This is a huge gamble to receive as little as a few hundred dollars while putting your beloved vehicle on the line. While many pawnshops and specialized lenders glorify the ease and convenience of car title loans, look over other options before making a deal with the financial devil.