A lot are times when we cannot balance our budgets with the money that currently sits in our pockets.It pushes us to look for extra cash. Emergencies may also occur along the way, forcing us to quickly look for a way out. If you own a car, then you probably may want to consider an auto title loan. Technically, it is not just cars that are involved. We are talking about trucks, motorcycles or any kind of automobiles. The loan involves borrowing a certain amount of cash against your automobile for a specific period of time, mostly about 30 days.
With the internet, most auto title loan lenders offer loans online, thus saving you a trip to their offices. All you need to do is provide the information they want. It doesn’t take much time to get a car title loan, just a couple of hours and the auto title loan is approved. Auto title loans have become a life saver in the recent years.
Obtaining an auto title loan
Auto title loans need verification that you own the automobile you want to use as collateral and that it is clean and hasn’t been used as collateral for other loans. If you prove this to the lenders, then the loan process starts here. The lending company will inquire about your place of residence, and the information on the car and the amount you want to borrow.
All lending companies will want a couple of documents as proof of your identity. They will need the original auto title for the car you want to use as collateral and will also require you to produce other information such as the insurance of the car. A photo identification will be required. Depending on the company, some of them will ask for proof of work, employment or source of income.
The lending company may ask you to give them a duplicate set of keys or they will make you buy a roadside plan, although at the back of your mind you always hope these two will not be of use at any one time.
Auto loan details
Lending companies will offer small loans from about $150 to about $900. They usually offer an amount that is between 20%-50% of the car’s worth which has been used as collateral. However, depending on the terms of the agreement, the loan could be as big as $3000. Automobiles made in 1999 and present-day models have a higher chance of securing a larger loan. It also includes vehicles which have been driven 125000 miles or less. This is because it means that the automobile is in good shape.
Repayment is about 30 days in most cases since this is a small loan. The borrower may decide to extend the repayment period but that will depend on the terms of the agreement. If the lender agrees with the terms and conditions of the loan, he signs the loan agreement and gets the loan.
Interest rates and APR
Interest rates of an auto title loan are quite high. This is because the loan is a small one and the lender doesn’t have much of the borrower’s details except that his car is used as collateral. Also, it should be noted that this loan doesn’t require the borrower to have good credit to qualify for one. Interest rates can go up to about 25% of the total value of the loan. This is quite high compared to other types of loans in the market.
The Annual percentage rate of the auto title loan is very high. Most loans in the market have an APR of about 25% or 45% at most but the auto title loan has an APR of about 300%. This means that you may be required to pay way more than you actually borrowed. This APR is due to the fact that there is not much regulation on auto title loans in most states, causing some lenders to impose ridiculously high-interest rates.
Repayment and loan servicing
After taking up the auto title loan and solving your little financial mishap, the lender will definitely want his money back by the end of 30 days. Here you have a couple of options. You may decide to pay up the loan in person, that is personally going to the company and make the repayment. You could also pay through online payment, or make an arrangement to allow the company to make a withdrawal from your debit card. It really depends on what you really are comfortable with when servicing this debt.
You may encounter difficulties when repaying your debt, causing you to either be unable to clear the debt on time. When that happens, the lending company may suggest you take up a rollover.
This is where the borrower is given more time to service his debt after the expiration of the initial 30 days. However, a review of the loan is done. This would include a new interest rate and the inclusion of other fees.
It should be noted that rollovers have the disadvantage of accumulating more debt. Assuming the rollover is done more than three times, this leads to increasing of the debt instead of it being fully paid up. Thus, the borrower is thrown into more financial difficulty. So the borrower should be careful not to roll over too many times.
This occurs when the borrower is completely unable to repay the debt. Remember the duplicated keys and the roadside plan? Your car is repossessed by the lending company to settle the outstanding debt. The lender may sell the car and use the money to settle the debt. If the debt wasn’t that big, you may get the remaining money after the company has sold your car and settled their debt. However, it all depends on the legislation in your state. Some state lets the lender keep all the money from the sale of the car, while others force them to return the remaining cash back to the borrower.
Auto title loans will work for you if you have the ability to repay the loan. If you cannot repay the loan, it may cause your car to be repossessed. On the brighter side, the loan is suitable for everybody, regardless of whether you have good credit or not.