The world of lending can sometimes be an intimidating one and getting a loan can be difficult for some. Title loans are a type of secured installment loan that gives borrowing opportunities to those whose financial situations might otherwise prevent them from doing so. As easy to get as title loans can be, it is important you be informed about how they work first.
You Can Get a Loan Very Fast
A car title loan is designed for those who need quick cash for unplanned expenses, excessive debt, or some sort of emergency. The reason they are so appealing is because the application process and approval period is fast. Really fast.
Many lenders boast a “same day funding” mantra that is music to the ears for those who may be really worrying about their financial situation.
A Great Credit Score is Not a Requirement for This Type of Loan
Besides the enticing speed at which a borrower can be approved, another reason why people are drawn to them is because of how flexible they tend to be for accepting subprime applicants. For car title loans, creditworthiness is usually not the most important factor for approval.
How Lenders Are Able to Offer These Loans
Title loans are secured loans, meaning that in order to be approved, the borrower must give the lender collateral. The asset offered as collateral gives the lender security that the loan will be repaid.
In the case of a title loan, the collateral being offered would be the title to your vehicle. However, many title loan lenders will let you keep and drive the vehicle itself while you repay your loan.
The Risks of a Title Loan
Taking on any debt has risks and costs associated. In the case of a title loan, the risks and costs are higher than with a traditional bank loan. However, it may be the only option some borrowers have. These costs are inherent to what simply is a riskier loan.
In the case of title loans, the risks are that you could lose your vehicle if the loan isn’t repaid, and the cost is an above average interest rate associated with the type of loan.
Title Loans Are Some of the Most Convenient Loans Available
Some who are considering getting a title loan have probably also considered just selling their car outright. However, selling your car means that you now no longer have the convenience of reliable, daily transportation.
Additionally, selling a car isn’t easy. It takes time and effort to find a buyer willing to pay a reasonable price for your vehicle. The benefit of a title loan is that you can utilize your vehicle’s equity to pay bills, debts, or to cover an emergency without losing the use of your vehicle.
Not only can you keep and use your car as normal, but there are other convenience factors as well. Many title loan lenders can offer same day or next day funding without you ever having to visit an office.
Having a brick and mortar location increases overhead costs, so loans obtained online tend to be cheaper and also way more convenient.
Documents like proof of residence, identification, and your vehicle’s title can usually all be submitted with your loan application from the convenience and comfort of you home.
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