While you may be driving the car of your dreams, you may realize you don’t have enough capital to make your other dreams a reality.
Business owners and consumers that find themselves struggling to get a loan or make money through unconventional means may find that turning in their car title for a short-term loan may be the right option.
Use Your Car for Cash
Using your car to make quick cash can seem confusing. Do you turn your car in? Is the money really worth it? If you’re asking yourself these questions while considering using your car to get a loan, it’s time you learned the truth about car titles. Read on to learn eight of the most important facts about taking a loan out against your car.
Car Loans are More Common Than You Think
Car loans are becoming an increasingly more convenient way for a car owner to borrow money. While credit cards are an easier option for some consumers, with others, auto title loans offer the best option when consumers are in dire financial need. While title loans may not be a long-term option for financial stability, it provides consumers with a substantial amount of cash in an immediate situation.
Auto Title Loans Aren’t Well Regulated
Some states completely ban title loans while other states allow them, but fail to regulate them properly. In these states, it is common for these loans to have incredibly high-interest rates with no limit on how much a consumer can borrow. Title loan lenders that go unregulated often force borrowers to take out loans that are a minimum of a few thousand dollars. In California, many lenders require that consumers take out a loan higher than $2,500, regardless of their need. This allows the lender to avoid any cap on interest rates.
Even with Regulations, Lenders Find Loopholes
While lawmakers are trying to level the playing field between borrowers and lenders when it comes to title loans, some lenders are still finding loopholes. In certain cases, lenders may find creative ways to skirt existing laws. For example, some lenders have worked to get state laws regarding title loans repealed. Similarly, others have set up shop offshore or on Native American soil, ensuring that they do not have to adhere to the laws of the United States. While these lenders often promise incentives like “free loans” and no loan limit, the price consumers pay when the interest adds up is oftentimes more than what was advertised. If you’re looking for loans in Memphis, be sure to research the laws carefully if you are interested in taking a loan against your car.
Many Lenders Implement High-Interest Rates
The average consumer takes out $1,000 with an auto title loan. However, once the lenders are finished piling on the interest, many borrowers end up paying more than the amount that they needed to borrow. In even more dire cases, the fees are so high that the lenders end up taking the car when it becomes clear that the consumer cannot make the payment.
A Car Title Loan May Cause You to Lose Your Vehicle
While taking a loan out against your vehicle can allow you to keep your car, 11% of borrowers have lost their car after getting an auto title loan. In most cases, getting a car title loan is a catch 22: consumers must take out a loan due to lack of revenue yet may lose their car due to their inability to pay the loan. With no car, many people spiral further into debt, compounding their financial instability.
With Auto Title Loans, the Process is Simpler
With most financing solutions, the process can be complicated and relatively time-consuming. With a title loan, consumers are using their car as collateral. If the collateral is priced higher than the amount you are requesting for your loan, your lender will almost always approve the application. This is why a title loan can be the most feasible choice for some borrowers.
Borrowers Receive their Loans Immediately
Since the title loan uses the borrower’s car as collateral, consumers usually walk away with the loan in hand the same day that they apply for it. This is hardly the case with other loans as it can take up to several months for a loan to come through. With the instant cash that your car title provides, you can get out of a financial bind almost immediately.
Quick Capital can Jumpstart Your Finances
While you need a loan to handle bills or debt, you may also find that an auto title loan is a quick way to jumpstart your business. If you are sure you can pay off the loan in a month, you may find that taking out a loan against your car is a feasible way to handle the costs of your new startup.
Auto title loans come with their fair share of pros and cons. If you are in a bind and need a quick loan to get back on your feet, you may find that taking a loan against your car is the best option. However, keep these eight truths in mind as you navigate your way through this process. After carefully considering the consequences, you may find using your car for cash is the right choice for you.