Buying a brand new, or even used car can be a very exciting time. You’re finally getting that new car that can make life so much easier. Once you’ve actually bought a car though, did you know that you can take out a loan on it? It’s a bit difficult to understand, but you can actually take out a car title loan to help get you a little extra money when things get a bit tight. What is a car title loan? How does the process work?
A car title loan is a type of secured loan where you give up your car as collateral. What is a secured loan? Basically, a secured loan is a loan in which you go to a lending agent, ask for a specific amount of money, and then put an item or piece of property up for collateral that’s around the same value as the loan you are taking out. If you cannot repay your loan then you forfeit your collateral to the lending agent so that they may try to sell it to regain their money back. In the case of a car title loan, you are giving up the title to your car in exchange for a loan.
What is the process of getting a car title loan? Well, you’ll need to show proof of ownership on a car that doesn’t have a lien on it already. A lien is simply a car title loan that has been put on a car but hasn’t been paid off yet. You’ll also need your government-issued driver’s license and proof of car insurance. Sometimes you might need proof of income and a piece of mail with your address on it as well. This is all to ensure that the lending agent is protecting him or herself from any damage that could happen without all of this information.
The amount of the loan is typically determined by the actual value of the car. This does not mean that your loan will equal this amount though. Typically, a lender will give you a loan that is half the value of the car, sometimes just a little bit more. Make sure to look up the current value of your car to estimate what your loan might be in comparison to what you need. Interest rates for these loans can be incredibly high though, which is how the lending agents make their money from these loans.
Taking out a car title loan can be great if you’re in desperate need of some money, but they also come at a huge cost. The interest rates are incredibly high, making it difficult to ever fully pay them back if the loan is a large amount of money. Also, the loan value is only about half of your car’s current value. You’re also gambling with the idea of having your car repossessed if you can’t pay the money back. Take a look at the risks associated with a car title loan before taking one out to make sure that this will be the best option for you.