A title loan can be a lifesaver when unexpected circumstances require you to come up with cash quickly. They are easy to apply for and the entire process can be done from the comfort of your own home. Simply because everything can be done online doesn’t mean there are no requirements to get approved. As this is a secured type of loan you’ll need to show proof of various items including a vehicle that’s owned free and clear and the ability to pay back the full amount. On the flip side, the car’s collateral is securing the loan and most lender’s aren’t going to have strict requirements when it comes your credit history.
What You Need to Know About Title Loans Online and The Credit Implications
Car title loans will have something that secures the automobile. Meaning a vehicle is the pink slip 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 are limited to 25% to 50% of the car’s cash value. The exact amount is determined when your title loan company inspects your vehicle.
- Length of Loan: Financing for a typical title loan can range anywhere from 1 to 6 years. The payoff time depends on multiple factors including the term you agree to with the lender and the state regulations that you need to follow. We often see renewal and early payoff provisions included with each lending contract, so it’s important to ask questions about these terms before you sign a contract.
- Interest Rate: Applicants will want to keep an eye exactly how much these auto equity loans cost. We host a great comparison tool which shows interest rates and lending terms for most title loan companies.. Short term credit is always more expensive in an emergency 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% or higher a month. So if someone borrows $1,000, you will have to pay $1,300 thirty days later, plus fees.
- Charges and Fees: On top of the interest rates, there are various fees which are often associated with title loans. Many lenders charge a $25 to $30 fee, plus processing fees, document fees, origination fees, key fees and more. These can sometimes add 20% to 25% to the cost of a loan.
Since most 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 companies don’t even need proof of employment and checking information 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. You don’t have to worry about your credit or other financial factors. Even employment or job history won’t matter in many cases. Pink slip lenders still want to see some proof 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 if you default. To protect themselves, most lenders will need you to provide some form of the following:
- Title: This often takes the form of the original pink slip. Which means the car has to be completely paid off with no extra liens or holds on the title. Furthermore, there often can only be one owner listed on the pink slip or vehicle registration. In all cases that is the person who is 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 the 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, if 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 these documents available before beginning your application process. There are a couple of other things you need to keep in mind, as well. The lender or bank will want to verify the vehicle’s condition before transferring funds. They may also need 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. Treat this form of borrowing much the same as you would a payday loan or online advance. We know the rates are going to be high and you want to pay off the full amount in the quickest amount of time. They should have a realistic expectation of paying the full amount you took out. Renewing a car title loan is 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 cash advances.
No one will deny that online title loan applications make it fast and easy. This is always the case when compared to traditional bank loans and alternative financing methods!