How Do Car Title Loans Work? Today many people are learning about various ways to obtain financial help without having to have excellent credit.
So many have questions about how do car title loans work. While some of them work differently than others, most are structured like a payday loan and will be due in full two weeks to one month after you receive your funds.
How Do Car Title Loans Work? The first thing!
- First you need to own your vehicle and have no cosigner on the title.
This is necessary as there can only be one person holding claim to the vehicle in addition to you. In reality you will be using your vehicle as collateral for the loan. Because of this you can borrow a higher amount usually than you would be able to get with a payday loan.
This type of loan works much like a payday loan with the exception of not requiring a checking account to secure the amount. Also the loan amounts can be much higher as the amount will be based on the value of your vehicle.
Most lenders will allow thirty to fifty percent of the value to be borrowed. This is where people tend to run into an issue because they will be unable to pay the full amount if they borrow more than is actually needed.
How Do Car Title Loans Work? The good news!
Some lenders of this type offer a payment plan where you can borrow the cash and make payments on the amount plus interest over a period of time. You vehicle is used to guarantee the loan.
While the interest rate is still very high on these types of loans, if you are able to obtain one that offers a payment plan for repayment you will find that it is much more helpful.
Unfortunately much like payday loan advances this is another way that consumers can find themselves in a cycle of debt that is nearly impossible to get out of without a significant amount of cash being received.
For this reason many people are finding themselves in a cycle of paying the renewal fees instead of paying off the loan. This has to be considered when you answer the question: how do car title loans work?
How Do Car Title Loans Work? My last tip for you!
- Some states have made this type of loan illegal due to the misuse of them by lenders.
Because they end up with full rights to your vehicle if you are unable to pay, they can simply come and take your vehicle at any time after the payment was missed. This creates problems for those who require their vehicle for transportation to and from work or school.