There are many financial products related to vehicles. Auto loans and auto leases are the most common ones. But there is a third financial product related to vehicles which is just as useful but half as well known as the previously named ones: auto title loans. An auto title loan is a very versatile type of loan which works very much like a payday loan, with the only difference that it belongs to the secured loan group.
This article focuses on car title loans, it is an explanation on their very nature, on what they entail as financial products and on the obligatory requirements for approval.
Car Title Loans
This type of loan is, as stated before on this article, a secured loan. You borrow a sum of money by pledging your car as a security for the loan. The amount of money you can apply for ranges between $ 601 and $ 2500 more or less. As you can see, this loan can be compared to a secured form of a payday loan. It is also a short-term loan, usually lying between 15 and 30 days at most. If you fail to repay it at the end of the loan, you will be able to "roll it over". If "rolled" over, the interest rate on the loan will accumulate.
The tricky thing about this loan type is that if for some reason you fail to repay it after it has been "flipped" the maximum amount of times (by law, 6 times), you may have your car repossessed. The interest rate on car title loans, just like in payday loans, is very high. Perhaps even higher than on a cash advance loan. The normal rate is about 25%, or a 300% annual rate.
Vehicle title loans are meant to be used only in an emergency, otherwise, if used regularly for common purchases, they institute a very bad deal for the consumer.
Auto Title Lenders
These are the lenders offering auto title loans. They make an awful high amount of profit from the interest rate that they charge on the loan, and sometimes will do anything to entice you to apply for one of their loans. They will focus on bad credit and elderly people. If you are going through a rough patch and you are in need of money, applying for a title loan involving your car probably will not be the best idea. Try and find other sources of finance because in the end, the interest rate will end up eating up for debt, and you will not benefit from this at all.
Often, these lenders call themselves 601 lenders. Why is that? Because they can only charge high interest rates if the loan is above $ 600.
Vehicle Title Loan Requirements
Qualifying for this type of loan is very easy. It might be a bit harder than qualifying for a cash advance loan, but easy nonetheless. The first and most important requirement is a car. You must be a car owner (which must be free from liens against it) and be in possession of the title. You must also be employed and be an American citizen with at least 6 months of residence in your current home.