Online title loans can be a lifesaver when unexpected circumstances require you to come up with cash in a hurry. They are easy to apply for which can be usually done from the comfort of your own home. You can immediately find out whether you are approved or not. And perhaps the best part is that you get the funds really quick! However, you need to understand exactly how they work and what will be required from you in order to get approved for most car title loans
What You Need to Know About Title Loans Online and credit implications
Car title loans are secured loans, meaning a vehicle is used as collateral for the loan. In simple terms, a finance company will confiscate the vehicle if payments are not made. Here is what you need to know about getting a title loan and what needs to be done when applying online.
- Secured Value: Car title loans will generally be limited to 25% to 50% of the car’s cash value. The exact amount will be determined when your title lender inspects your vehicle.
- Length of Loan: Financing for a new car can be for up to six years, but car title loans are meant to be used for very short term circumstances, so their terms are usually for 30 day periods. These are often renewable several times, but that does get really expensive.
- Interest Rate: Applicants will want to keep an eye exactly how much these auto equity loans cost. We host a great comparison tool of online title loans on our site that further shows interest rates and lending terms. Short term credit is always more expensive in a financial situation. Title loans can be expensive even in states where the interest rate is capped. Feel free to view the Government’s site about the various financing choices that are made when it comes to lending. Where there are no limits, interest rates are usually set at 30% a month. So if someone borrow $1,000, you will have to pay $1,300 thirty days later, plus fees.
- Fees: On top of the interest rates, there are various fees that are often associated with title loans. Many lenders charge a $25 to $30 lien fee, plus processing fees, document fees, origination fees, key fees and more. These can sometimes add an additional 20% to 25% to the cost of a loan.
The good news is that, since most online title loans are secured, an applicant’s credit history is not as important. In fact many companies don’t even check a borrower’s credit history or credit score at the time of approval. Some don’t even require proof of employment or bank account history. This further suggests that these loans are pretty easy to get approved for. Still there are some requirements associated with getting approved for online title loans. Here are some of the most common ones for you to take note. While you don’t have to worry about your credit, or even employment in many cases, lenders obviously still want to see some indication that you will be able to repay the equity loan. They also want to be sure that they can retrieve the car without too much difficulty in the event of a default. Therefore, in order to protect themselves, most lenders will require you to provide some form of the following:
- Title: This must be the original title, which means the car has to be completely paid off. Furthermore, there usually can only be one owner listed and that is the person who will be granted the loan.
- Registration: An unexpired registration in the same name as the one on the pink slip.
- Proof of Insurance: Primary insured must be same name as title and registration.
- Government Issued ID: Absolutely must. It should be same name as on title.
- Proof of Residency: A utility bill or other evidence of residency by same name as on the pink slip.
- Keys: A working set of all keys to the vehicle, in case it needs to be repossessed.
- Valid References: Usually names, addresses and phone numbers of at least 2 people.
- Proof of Ability to Repay Loan: Pay slips, references from financial institutions, banks, etc.
You should make sure to have all of these documents available before beginning your application process. There are also are a couple of other things you need to keep in mind, as well. The lender or bank will definitely want to verify the vehicle’s condition before transferring funds. They may also require you to attach a GPS unit to your automobile so that they can track it in the event of default. But here’s the kicker, some of those models can be used to disable your car remotely!
Car title loans should only be used for the shortest amount of time possible, and only by people who have a realistic expectation of paying it off fairly quickly. Renewing a car title loan over and over again is basically like selling your car for a fraction of its value. Still, someone who owns their car outright and is facing a very temporary cash crunch can use these types of loans effectively. And there’s no denying that online title loan applications make it fast and easy. This is definitely the case when compared to traditional bank loans and alternative financing methods!