How Title Loans Work


In our last blog post we discussed title loans. We wanted to go a little more in-depth about title loans in this blog post. Please note, some of this information was taken from The Cali Loan Company.

A title is an official document that proves or represents ownership over a certain asset. A title loan therefore is a loan that requires you to place the title of a property that you own (usually a car) for use as a collateral or security to get a loan. The title must be free from administrative or judicial restrictions for it to be able to help you get financing.

The lender holds this title of your property until such a time when either you clear the loan or you fail to meet your obligations. In addition to verifying the collateral submitted, the lender also verifies that the borrower has stable employment or has some source of regular income. Should the borrower fail to pay the loan as agreed, the law allows the lender to sell the asset in order to recover his money.

A title loan is one of the best ways to get faster money (usually within a day), without regard of your credit score since this type of loan does usually not perform a credit check. The loan amount, however, is less than the value of the property and it qualifies you to about 30% to 50% of the original amount of the title of the property.

This kind of credit is transient and has a reimbursement time of under 60 days. It additionally has a tendency to have substantially higher interest rates compared to other loans. The interest rate changes from bank to loan specialist and can be somewhere around 100% and 350%. It is therefore imperative for you to reimburse the aggravated credit sum inside the constrained compass of time to recuperate your title as well as to stay away from exceedingly high interest rates. Below you will read about the good, the bad, and the ugly about title loans:

Benefits of Title Loans
• If you have a bad credit standing, you can still get a loan as your credit score will not be looked into when you apply for the loan.
• It is a perfect type of loan if you need emergency funding to meet pressing obligations.
• It is also perfect if you require a small amount of money as it allows you to be able to afford to pay on a short period of time.

Dangers of Using Title Loans
• Debt is an inescapable fact in our lives and there are a lot of ways that we can repay our debts. While title loans allow you easy access to money to purchase what you want, they come with high interest to the borrower compared to other types of loans. They also have a short repayment period, usually one month, from the time the loan was first obtained.
• Another danger is that there is no equity between the value of the loan and the value of the title of the property. This means that you can lose a more valuable property if you are unable to pay back the loan. Therefore, you must thoroughly consider your decision of getting a title loan.

This type of loan is very convenient if you know your responsibilities well and also make payments diligently to avoid seizure of your property. Therefore, ensure that you are capable of repaying this loan before you apply for it.