Our cars are our trusted partners for transportation, business, leisure and any other activity that involves getting from point A to point B.
When we face tough times, especially when it comes to finances, our cars don’t just help us get to banks and lending institutions, they can also be the key to getting the financial solution we need. we need so much. We know that our cars are very important vehicles, which is why an auto title loan shouldn’t be your first or immediate option. However, in situations where you have no other choice, it would be good to know how to handle an auto title loan.
Here, we will share some essential information about auto title loans, which you may find useful in times of need.
What is an auto title loan?
As the name suggests, this is a short-term loan that uses the clear title of your vehicle as collateral. The loan amount you can get may vary depending on the lending institution. Generally, you can borrow between 25% and 50% of the value of your car. Depending on the state or city, loans can range from $100 to $5,000, but if you apply for an auto title loan in California, you can get a loan amount of up to $20,000. Most lenders who offer this type of loan require that you own your vehicle to qualify. Some lenders may offer this loan even if a car is still being paid off, but the majority of auto loan lenders require the car owner to have no debt attached to the vehicle.
How an automatic title loan works
From the description above, you relinquish ownership of your car to the lending institution. However, even if you received the loan, you can still use your vehicle. This is an important factor, especially if you use your car for work. You can choose between two types of title loans: the one-time payment loan and the installment loan. If you are confident in your ability to repay immediately, the first option is a good way to settle your loan. You just need to pay the full loan amount plus interest charges within a month or a period agreed between you and your lender.
The installment loan option gives you time to set aside money for your monthly payments, which can take three to six months, depending on the lender. Still, you need to consider the interest rate as this is a short-term loan, which means an auto title loan usually has a high annual percentage rate (APR).
Basic requirement for an auto title loan
Now that you have an idea of what an auto title loan is and how it works, you should also know the basic requirements to get one. Depending on the lender, the following requirements are necessary for applying for an auto title loan.
- Identification – you may present a government or state issued identification card, driver’s license or international passport for identification and registration purposes.
- Personal Information – an easy way to provide your personal information is through an online application, where you will also need to provide your address, date of birth, SSN and contact details. By completing the online application form, you save time rather than applying personally to the lending agency.
- Car Information – in most cases you will need to present your car to the lender and provide basic information about your vehicles such as make, model, year, VIN and license plate number.
- Car title – this is an obvious requirement, but still needs to be included, especially for the benefit of new car title loan applicants. Typical lender terms may be that the title must be registered in the borrower’s name, must be clean, and must be free of any liens.
- Proof of Insurance – You may be required to show full vehicle insurance for a particular loan amount, such as a loan of $5,000 or more in the state of California.
- Proof of repayment capacity – some lenders will require this, and you can provide one of the following: bank statements, regular pay stubs, or disability benefits.
Things to Remember When Applying for an Auto Title Loan
An auto title loan can help provide a quick financial solution in the event of an emergency or incident. However, you should also be aware that car loan interest rates can be quite high, so you should at least be prepared to repay your loan and interest on time. Plus, there’s the risk of losing your vehicle to the lender if you can’t repay your loan. With that in mind, find a loan company that offers flexible loan amounts and payment terms. You should be able to find one that offers loans and payment schedules that you can manage and are comfortable with.
Most importantly, always carefully review the terms of the loan. This applies not only to auto title loans, but to all types of loans as well. Lending companies will provide you with the terms of the loan in writing before you sign it. Check to see if the document meets the provisions of the federal Truth in Lending Act, particularly in disclosing the cost of the loan. Term details should include finance charges and APR. Other fees, such as processing fees, document fees, loan origination fees, late fees, title fees, and lien fees, must also be disclosed in the terms of the loan.
If you find yourself in a situation where an auto title loan is your only option, you need to know the basics of the loan and understand the terms of the loan. Carefully read and go through all the details of the loan terms, which will be provided to you in writing by your lender in title. Also, make sure your repayment options are covered when it’s time to pay off your auto title loan. Remember that you are putting ownership of your vehicle at stake, so be prepared to take it back.