LOS ANGELES, Nov. 30, 2021 (GLOBE NEWSWIRE) — Title loans offer car owners a quick and often easy way to get a loan. Many lenders have lenient credit requirements and consider car value when determining loan amount and eligibility, and borrowers can often get their loan in one day. Here’s how title loans work and three things borrowers should know before applying for a title loan.
How do title loans work?
A title loan is a secured loan that uses a borrower’s car title as collateral. These loans often come with simple applications and quick approvals, so borrowers may be able to receive funds the same day they apply. Since the borrower secures the loan with their car title, it makes the loan less risky for lenders. This means that borrowers with poor or fair credit can still be approved.
What to know before applying for a title loan
Here’s what borrowers need to know before getting a title loan:
1. Car loan and ownership status
Title loan borrowers must own their car free and clear, which means they have paid off all existing car loans. Borrowers who do not own a vehicle may not be eligible for a title loan.
2. Loan amount
Lenders primarily use the value of the vehicle to determine the loan amount, but they do not offer the full appraised value. Instead, they usually lend around 25% to 50% of its value, depending on the lender.
For example, if the lender values a borrower’s vehicle at $20,000, that lender might offer $5,000 to $10,000. However, if the borrower needed $20,000, they should either bring a higher value vehicle or consider another loan option.
3. The borrower can keep his car
An attractive feature of title loans – in addition to being quick and easy to obtain – is that the borrower can continue to drive their car while the loan is in progress.
This way, the borrower can get the money he needs without giving up his transportation. But before taking out a title loan, the borrower must ensure that he can repay the loan on time and in full. Otherwise, the borrower would risk losing his vehicle.
The essential
Title loans can be a great financial option for vehicle owners. Borrowers who own their vehicle and have a car valuable enough to get the loan amount they need will find them useful, especially since they can continue to drive their vehicle.
Notice: The information provided in this article is provided for guidance only. Consult your financial advisor about your financial situation.
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