Five Need to Know Facts About Title Loans
Title loans are an easy way to borrow money, but there are inherent risks you must consider before applying for one. Before you apply for a title loan, make sure you understand these five facts and are okay with the terms attached to your loan.
No Credit Check is Required
There is no credit check with a title loan. That's why they are so easy to obtain. This doesn't mean you can get the loan without providing any information. You must provide a copy of your vehicle's title, insurance, and registration. In addition, you have to give out your SSN, a copy of a recent paycheck, and a current utility bill.
Money is Available in a Day or Two
Once your application is approved, usually within minutes of submitting your application, the title loan company arranges an electronic transfer of the funds you're borrowing to your bank account. This money can be in your account in as little as a day, depending on how quickly your bank processes the deposit.Try this as well - Loan Auto Title.
Annual Percentage Rates Can Be High
Title loans are meant to be paid back as quickly as possible. You'll usually be given a monthly interest rate. Do not mistake this rate for the annual percentage rate (APR). Instead, take the monthly interest rate and multiply it by 12 months (one year). That is your APR. If your monthly rate is 12 percent, your APR is 144 percent.
Meant for Emergencies
Because of the higher APR, title loans are not meant for casual borrowing. They are best used for emergency situations where a bank loan is not fast enough, or the bank turned you down. There are situations where a title loan becomes necessary. Personal loans and home equity loans can take weeks to clear and receive payment. If your furnace dies in the middle of winter, you do not have time to wait for a bank loan to clear. Taking out a title loan and paying back the money as soon as a bank loan clears is the best way to get your home heated and prevent pipes from freezing, causing even more costly home repairs. Title loans should never be used to fund vacations or make extravagant purchases, however.
Skipped Payments Come With Risks
When you take out a title loan, you make a promise to pay back the money. The loan terms may be a year or two, but you still have monthly payments to make. If you suddenly cannot make those payments, you risk paying higher interest rates and penalties. If you still cannot make the payments, you may be repossessed. Make sure you can afford the payments when you apply for the loan.