Understanding how auto title loans work is essential before you apply. Most people borrow money with a title loan, pay it off, and have no problems. There is a small percentage, however, who really don’t understand how these cash loans work and end up in default. Here are 10 FAQs regarding auto title loans in the USA.
What is an Auto Title Loan?
An auto title loan is a loan in which you’re borrowing money based on the equity you have in your vehicle.
How Do Auto Title Loans Work?
To qualify for an auto title loan, you must have paid off any amount borrowed on your car. Say you have a car worth $5,000 per KBB and there’s no lien remaining. You can borrow against that $5,000 by putting up the title to your car as collateral. You borrow the money for the specified period of time, making payments as promised, and when the amount is paid back, the title of your car is returned to you. If you fail to pay as promised, the auto title loan company can take your car from you.
What Companies Offer the Best Auto Title Loans?
This can be a tricky question to answer. Rates charged by title loan companies depend on state laws. This impacts how consumers feel about the company they’ve used. In any case, title loan rates are higher than personal loans or credit cards, so you must consider that when applying for a title loan. Negative reviews are also often based on a consumer’s inability to pay back the amount they promised to pay back. As long as you pay back the loan amount when due, you’ll have a positive experience. In the end, finding the best auto title loans is easy if you carefully read the terms and make sure you understand them before you sign the paperwork.
Can I Refinance an Auto Title Loan?
If you have an auto title loan taken out, you may be able to get a new one, but the new company will refinance the original title loan. Your new loan will have the cost of the original loan, the new title loan fees, and any additional amount you want to borrow.
Are Salvage Title Auto Loans Available?
Cars with rebuilt titles have been in an accident or flood situation. The salvaged title essentially states that the car has been rebuilt and will not have the same value as a car with a clean title. Most lenders look at a car with a salvage title as being worth half what a car with a clean title is worth. You won’t be able to borrow as much, and it will be harder to find a company willing to work with you.
How High Are Auto Title Loan Rates?
Every state and every title loan company is different. Auto title loan rates are higher than a traditional loan. However, a credit check is not needed. As the company takes on greater risk by loaning money without checking the credit score, the rates are automatically higher.
What Paperwork Do I Need?
For any auto title loan, you must have the title to your vehicle. You will need to provide proof of income, be it a paycheck stub, bank statement showing automatic deposits, or retirement/pension payments. You need to provide proof of auto insurance. Finally, you need to have a government-issued photo ID.
Can I Apply Online?
Many companies offering auto title loans in the USA allow you to fill out the application online, but you will not get the cash until you visit a physical location. The key reason is that they need to look over your car’s condition to come up with the appraised value. They must also see your car’s title, your photo ID, and your proof of income and insurance.
What Happens if I Don’t Pay Off My Title Loan in Time?
Talk to the company that loaned you the money. Many times, they will extend the loan terms for a fee. Do not ignore them. This can lead to your motorcycle or vehicle being repossessed. If that happens, you’ll wake up to find your wheels are gone and you may never get it back.
Make sure you can’t get the money you need from friends, family members, or alternative options before you apply for a title loan. If you’re out of options, take your time to research auto title loan companies’ reviews, interest rates and fees, and licenses.
