Car title loans are specially designed for those who need quick cash to pay bills, face an emergency, or manage debt. If you owe or own a certain vehicle very little, an auto title loan – also known as a âquick auto loanâ – is fairly easy to obtain. However, quick and easy is sometimes too good to be trusted. You will end up paying high fees for this type of loan, and losing your car is also a risk.
Before you go with a decent car title loan, here are three things you need to know.
- If you want to get a car Miami securities lending, you must own your car or at least have equity.
In other words, an auto title loan is basically a small secured loan that often uses your car as collateral. Typically, car title loans range from $ 100 to $ 5,500, which is usually an amount equal to 25 to 50% of the value of the car. Often the loan term is short; only 15 or 30 days. And although it is known as a âcarâ title loan, this type of loan also applies to other vehicles, such as motorcycles and trucks.
If you want to get a car title loan, the requirements are clear title – that is, 100% ownership of the vehicle, without any lien – or some equity in your car.
Equity is the value of the asset, such as a house or a car, minus any debts you owe on that particular asset.
“Title pawns”, “title pledges” or “pink coupon loans” are other common names for car title loans. The term “pink slip” essentially comes from the pink paper that California car titles were once printed on.
Typically, the lender will not only want to see your car title, but also your proof of insurance, photo ID, and your car.
When you get approval for a particular car loan, you issue title to your car to your lender in exchange for that loan. It is until you pay off the loan that you will get your title back.
- Car title loans have high interest rates and fees
When it comes to an auto title loan, it is very common for lenders to charge around 25% of the loan amount each month to fund the loan. If you get a 30 day car title loan for around $ 1,000, for example, the fee is 25% ($ 250), and you will need to incur $ 1,250, plus any additional costs, which will pay off your loan. at the end of the month .
This translates into an APR, or annual percentage rate, of over 300%. Generally speaking, this is significantly higher than many other forms of credit, such as credit cards. If you get an auto title loan, your lender should tell you the APR and the overall cost of the loan. Indeed, you can compare this information with that of other lenders to help you find the offer that is best for you.
- You could lose your car if you don’t pay off your car title loan
When you get an auto title loan and you don’t pay back the specific amount you borrowed, along with all fees, your lender can roll over your loan for a new one. Once you’ve done that, you’ll add even more interest and fees to the amount you renew.
For example, you might have a loan of $ 500 and fees of $ 125. You are not able to repay the full amount after the 30 day period. You decide to pay the $ 125 fee and then transfer the original $ 500 into a new loan with a 25% fee.
When you pay off your new loan, you’ll have paid an overall cost of $ 250 in fees out of the $ 500 you originally borrowed. When you keep renewing your loan, you might find yourself in a cycle of additional charges that makes paying the lender a daunting task.
The lender could in fact take back possession of your car if you find yourself in a situation where you are unable to repay the debt. And you could end up paying even more fees to recover the vehicle, as well as the overdue amount.
Simply put, if you are unable to resolve this issue, then you will have to look for (and pay for) other means of transportation.