Title Loans: 5 Things You Need to Know About How They Work

Thanks to Jeff Kramer on Flickr for the image

Nearly every business owner needs cash to address a pressing need from time to time. One of the ways to obtain cash is through title loans. This is one of the quickest ways to get cash for emergencies.

However, it is important to know what title loans entail before settling on them as an option. For example, anyone looking for Car Title Loans Albuquerque must understand the requirements. What’s more, they must submit the required documents to be able to access them.

Importantly, borrowers need to understand the requirements and the risks involved when they’re considering applying for a title loan. Here is what you should know:

 

1. You Can Make Your Application Online or Offline

With the advent of technology and the Internet, you can apply for your title loan online. Do this by submitting the required forms and documents. Alternatively, you could visit a local office and get your loan by filling in the requisite documents there.

An agency of the lender’s choosing will inspect your car to determine its value. This will help the lender to determine how much money they can lend you. It is unlikely that you will be able to borrow an amount higher than the stated value of your car. Usually, the amount you can borrow is a percentage of the total value of your car.

 

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2. Your Car Secures the Loan

Keep in mind that your car will be used as collateral in case you fail to pay the loan as agreed. The lender will require you to submit the car title. They will hold the title until you have completely paid the loan back. At times, the lender could require other proofs of car ownership, such as providing them with a set of keys and supporting documents besides your car title.

 

3. Your Credit Score Might Not Count

Title loans depend heavily on your car and its value. Therefore, your credit score might not count when you’re getting this type of loan. In other words, the lender offsets the risk they take against the value of your car. To put it bluntly, if you fail to repay the loan, they will take your car.

 

4. High Fees and Interest Rates Apply

These types of loans are usually expensive due to high fees. In addition, you can expect to also pay high interest rates.

For example, the rate of interest can be as high as 25% in a month. To take this example further, a loan of $1,000 with a repayment term of one month at the rate of 25% per month will cost you $250 in interest. This does not include the fees the lender will charge you during processing.

Altogether, the amount of money you will pay to the lender by the end of the loan term is usually significantly higher than the amount you borrowed. Therefore, these expenses are factors to consider.

 

5. Title Loans Have Short Periods of Payment

Ideally, title loans are short-term loans with terms no longer than a year. Some loans, however, will have terms for only a month. Therefore, you probably should think twice before taking this type of loan unless you have a legitimate pressing need.

People usually take out title loans only to address an emergency and only if they know that their salary or stable business income will be useful in repaying it within the specified time. People who have no stable source of income should not take out title loans.

 

Title Loans Are Only One of Your Options

Taking a title loan is one of your options when you need help with a financial emergency. However, it is important for the borrower to understand the risks involved and the conditions under which the loan is disbursed. Moreover, it is even more important to remember that your car will be used as security for the loan. If you fail to pay, you could lose your car.

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source http://www.business-opportunities.biz/2019/01/29/title-loans-work/