How Do Car Title Loans Work?
It is easy to get a car title loan because the borrowed money is secured using the value of your car equity. That means you do not need to pass a credit check or income verification to borrow $10,000 against your car. Many lenders allow you to borrow 25% to 50% of your car’s market value, but you can always take a smaller amount for cheaper payments.
To ensure 100% title loan approval, it is best to use a fully paid off car and you have the proper car insurance papers for it as well. You need to leave the original copy of the owner’s title and a spare set of keys with the lender, so that they can easily repossess your car or truck if you default on payments. These will be returned to you once you completely pay down the title loan. Some lenders will also allow you to borrow money against a car that is nearly paid up, but the maximum amount is usually around 30% of its value.
The lenders will verify the value of your car, factoring its current condition and mileage. Finally, they will give you a loan offer stating the amount and interest rates. From experience, the interest rates will be higher if you wanted to borrow up to 50% of the car value. If you do not need a big loan, choose lenders with the lowest title loan rates and it will reduce your risk of car repossession as well.
The typical car title loan term is 30 days. As for the maximum loan term, you need to negotiate with the lender for more time to pay back the loan. Do this before you sign on the loan agreement if you know there is no way you can pay back the $5000 loan in 30 days.
High Risk Car Title Loans
The most stupid thing a title loan borrower can do is to accept a $5000 loan when they only need to borrow $2000. That means you are going to pay interest on the extra $3000 that you do not need, and that alone may cause you to have problems paying the lender on time. If you start extending your title loan payments, eventually you have to default and that means losing your car due to repossession. That is the real danger when it comes to borrowing money from title loans.
Usually, people use car title loans for borrowing bigger amount of money compared to the $1000 30 day payday loans. That also mean you are not likely to be able to pay back a big title loan in 30 days using just one pay check. Are you surprised the car title lenders do not require you to fax in your income statements or employment records? They are probably hoping you cannot afford to pay back the loan, and they can legally claim your car as theirs so why bother checking your income in the approval process.
That is why many car title loan companies are willing to lend money to unemployed borrowers with bad credit as long as the car or truck used as collateral has a good market value. They can make more money through repossessing the vehicle, or additional interest fees from loan extensions etc.
How To Stay Safe With A Title Loan
Remember not to borrow more money than you need from a title loan and negotiate from the start for a longer pay back period. If you only need a $2000 loan today, it may be easier to look for payday cash advance or unemployed loans if you do not have a job.
Some people think that car title loans will be cheaper because you secure it using your car as collateral. This is not necessary true as you compare the title loan interest rates versus other types of legit no credit check personal loans on the market. The main attraction of title loans is that it allows you to borrow more money with guaranteed approval, but whether you end up losing more is a different matter.
Before you risk your car for a title loan, plan ahead and calculate your bills, expenses and income to see if you can afford to pay back the loan. If you really need the loan but chances are low that you can pay it back, you may as well sell off your car since it will bring you more cash and there is no risk of getting into bad debts.
I hope you now understand the risks involved with car title loans for people with bad credit. Many people forget they can sell off their car instead of losing it to the predatory lenders. If you cannot get a loan due to having no income or poor credit history, avoid borrowing more than necessary against your car to minimize repossession risks.