Understanding How Title Loans Work
Everyone runs into a financial struggle at some point. Money's tight and your furnace quits, and your bank can't help you fast enough. This is only one of a myriad of reasons to consider a title loan. This is not a decision to take lightly, however, as there are risks you must understand with a title loan.
What is a Title Loan?
With a title loan, you temporarily sign over the title of your car to a lender in exchange for cash. Many title loans have terms requiring you to repay the money within 30 days. A bank loan may be your first choice, but it can take months for a refinance or home equity loan to clear, and personal loans can take weeks. You simply may not have that time especially if you need the money to pay for emergency home repairs that cannot wait. Title loans become a helpful way to get the cash you need while waiting for a bank loan to clear.
Information Needed for a Title Loan
While a bank loan takes time, title loans are quick and easy to obtain. There is no credit check. At most, the title loan company will do a quick verification of your income, usually by looking at a copy of your recent pay stub. You may also need to provide your driver's license number, social security number, your car's title, a current utility bill, proof of vehicle insurance, and a copy of your vehicle registration.
How Quickly Do You Get the Money?
With a title loan, you get approval in minutes and the money is sent to your bank account as soon as the paperwork is signed. This means you could have the money within a day.
Are There Restrictions?
In most cases, a title loan is only given if your car is no older than 10 years and worth at least $2,500, though the requirements will vary from company to company. You have to be at least 18 years old in order to qualify for a title loan.
Things to Verify Before Filling Out an Application
Prior to signing any paperwork, make sure you understand the terms. If you're signing up for a monthly interest rate of 10 percent, that breaks down to an annual percentage rate of 120 percent. It's important to understand these rates and why it is important to pay back the money as quickly as possible.
Title loans are not available in every state. Make sure that the company you are working with is able to offer you a title loan before you start filling out an application.