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How Title Loans Work: What Consumers Need to Know

1 February 2020 No Comment

Every year, around two million people take out title loans. Are you considering this approach?

If you need access to cash quickly, a car title loan can be a good option to consider. However, it’s important to know exactly what you’re getting into before you apply for this type of loan. Otherwise, you could end up facing some unpleasant surprises later on.

Explained below is everything you need to know about how title loans work. Keep this information in mind so you can be an informed borrower.

What Are Title Loans?

Title loans are a type of secured, short-term personal loan. The lender will use your car’s title as collateral when you borrow money from them. If you don’t pay back your loan on time, the lender can seize your car to make up for the money they’ve lost.

How Title Loans Work

If you’re going to take out a title loan, you’ll first need to have equity in your car. In many cases, the lender will require you to own your car outright. This means you don’t have a loan that you’re making payments on.

If you’re approved for a title loan, you’ll give the title of your car to the lender.

You’re allowed to continue driving your car for the term of your loan. Sometimes, though, the lender will install a GPS device inside of the car to track it. They’ll make a copy of your car keys as well.

These two practices give them easy access to your car if they need to repossess it in the event that you default on your loan.

The average term for a title loan is somewhere between 15 and 30 days. You can take out loans for up to a year, though.

The amount of money you can borrow also varies from lender to lender. Most of the time, though, it’s between 25 percent and 50 percent of the value of your car.

Benefits of Title Loans

Title loans aren’t a good fit for everyone. In some cases, though, they can be a good option to consider. Think about whether the following benefits appeal to you before you decide to take out a title loan:

Get Cash Right Away

Sometimes, you find yourself in a bind and need to get your hands on some cash right away.

When this happens, you don’t have time to go through a lengthy loan application process at the bank and wait for your application to go through. If you need money fast, a title loan can help.

You’ll get cash as soon as the application process is complete. You won’t have to wait around for days for processing or approvals. The money will be yours, and you can do whatever you want with it.

Fast Processing Times

The application process for title loans is very quick. In most cases, it gets wrapped up in about 30 minutes. Just half an hour and you can be on your way with cash in hand.

Remember, you get to keep your car, too, when you take out a title loan. You can drive away in style knowing you have the money you need to meet your responsibilities.

No Credit Score Needed

Many people have a hard time getting money during tough times because they have a low credit score. If this is you, you may want to consider a title loan. Title loans don’t require a minimum credit score since the loan is secured by your car.

Your chances of approval are much higher with a title loan. If you’re struggling to get approved for other types of loans, this option might be a better fit.

Convenient Repayment Options

Title loan companies often offer convenient repayment options. You can choose a plan that works best for you and aligns with your payment schedule. As long as you have the right repayment plan set up (and stick to, of course), you’ll have no trouble repaying your loan and avoiding having your car repossessed.

How to Get a Title Loan

If you’re interested in the above benefits, you’re probably wondering what steps you need to take to get a title loan. If you want to apply for this type of loan and get approved, keep these tips in mind:

Gather Your Documents

Start by gathering the documents needed when applying for a title loan. The specific documents you’ll need to have on hand include the following:

  • A clear vehicle title
  • A government-issued ID (driver’s license, passport, etc.)
  • Vehicle registration

You may also need to provide proof of your income and/or proof of residency.

Find a Lender

Next, find a title loan company in your area. There are lots of title loan companies throughout the U.S., so it shouldn’t be too hard to find one that’s a good fit for you.

Be sure to check online reviews before you select a company, though. This will help you ensure they’re legitimate and a good option for your needs.

Meet the Basic Requirements

Once you’ve found a lender that seems trustworthy, make sure you meet their minimum requirements.

Every lender has slightly different requirements. In most cases, though, they require you to be at least 18 years of age and to own your car outright. If you can meet these criteria and provide a valid ID, you’ll likely be able to get approved without any issues.

Get Paid

Now, all that’s left to do is get paid. You’ll fill out the lender’s application online or in-person, and you’ll find out almost instantly if you’ve been approved. If you’re approved and you accept the car title loan, you’ll hand over the title to your vehicle and have cash in your hand before you know it.

Get Approved Today

You’re now well-versed in title loans and can answer questions about how title loans work with ease. Now that you know all this information, do you think a title loan is a good option for you?

If you’re interested in finding other ways to get extra cash, we’ve got lots of helpful resources on our site. Check out some of our personal finance articles today to learn more and figure out the best approach for you.


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