Sometimes, there’s no getting around it: you need cash, and you don’t have time to wait around for a bank loan.
No matter where you live, you’ve probably seen signs for automobile title loans. Sometimes called “fast auto loans” in casual conversation, these loans allow you to get the money you need in no time at all.
But if you’re new to the world of quick cash, you may be wondering if there’s a little more to the transaction. Here’s what you should know about this type of short-term loan.
What Are Automobile Title Loans?
Before we go any further, it’s important to understand what a car title loan is. With this type of loan, you’ll be getting quick cash, anywhere from $100 to $10,000, in return for one piece of collateral: your vehicle’s title. This type of loan is not for everyone, however, so make sure to consider the following before opting for one.
- To Qualify for the Loan, You Must Own the Vehicle
As we mentioned above, the collateral for a car title loan is the title to your vehicle. In other words, this type of loan only works when you own the vehicle yourself.
- The Money You Receive Depends on the Vehicle
Despite the common term “car” or “automobile” title loan, you can offer up any kind of automobile, motorcycle, or RV for this loan. The amount of money the lender offers depends on the vehicle’s worth, and the loan amount will always be less than the value of the car title.
- You Don’t Need a Credit Check
One of the factors making vehicle title loans so appealing is that there’s no need for a credit check. Even a poor credit score won’t have a negative impact on your eligibility, as the collateral you’re providing reduces the risk for the lender.
- You Can Use Your Car While the Loan Is in Play
Don’t misunderstand: you’re offering up the vehicle title, not the use of your vehicle. The lender will hold onto your car title during the length of the loan, but you can still use the car as you normally would. As long as you repay the loan, the lender won’t take possession of your car.
- You Choose How You Spend the Loan Money
With more formal types of loans, the lender might ask you to specify where the loan money is going. However, with a car title loan, you can spend your borrowed money as you choose, meaning your lender has no influence over the spending.
- The Loan Comes With Significant Risk
While these loans are a good way to get money fast for anyone who’s savvy with their finances, you should be aware of the risk as well. These loans come with high fees and high interest, so you’ll want to make sure you can plan to pay back the loan in a timely manner. Otherwise, you may lose your vehicle if you fail to make payments.
Decide if a Car Title Loan Is Right for You
Ultimately, you’re the only one who can decide whether automobile title loans are right for your needs. If you decide to opt for one after weighing the risks and rewards, make sure to keep these tips in mind as you move forward. Pay down the loan faithfully, and you’ll have an easy way to get some quick cash with little effort!
Looking for more tips to help you make sense of your finances? Check out our other guides for more personal finance insights.