Vehicle title loans, or cash loan for car title as they are sometimes called, provide cash for borrowers who need short-term financial assistance or have bad or no credit. The loan is secured by a car’s title as collateral, and the maximum loan amount is based on the appraised value of the vehicle. This provides vehicle title loans significant advantages over other conventional loans, but it also comes with drawbacks on its own.
No credit checks – if you have bad or no credit and you need to borrow money, a vehicle title loan is a good choice for a loan. This is because vehicle title loans do not usually require credit verification; the loan is already secured by the car title as collateral in order for a credit check to be necessary. So regardless of your credit score, this will not affect your eligibility for a vehicle title loan.
You can borrow small amounts – unlike loans from banks and credit unions, which only approve loans of substantial amounts, you can borrow as little as $100 from a vehicle title loan. This makes it especially beneficial for those who are simply looking for a bit of cash rather than borrowing large sums of money.
Speedy processing – while most loans take weeks to process and be approved, you can normally get the money from an approved car title loan on the day you applied for it. The lack of lengthy credit checks, coupled with very minimal requirements asked for by vehicle title loan CSOs and lenders, allow for a very fast processing time.
High interest rate – because the loans are covered by a relatively short term period (usually ranging from 20 to 30 days), vehicle title loans have very high interest rates compared to other types of loans. It’s not that impossible to end up paying annually for an interest rate that’s higher than the borrower actually borrowed. Because of this, it is strongly advised to repay a car title loan as soon as possible to minimize interest rate fees.
Miscellaneous fees – In addition to a high interest rates, some lenders also add a variety of fees to the loan. These fees have a variety of names, including processing fees, roadside assistance fees, documentation fees, lien fees and origination fees among others. Make sure to look into these fees before signing on a loan agreement.