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Do you have emergency savings? If not, you are not alone. Around 28 percent of Americans do not have savings to cover emergency expenses.
Are you thinking about getting a loan to cover an expense or need some extra cash? If you are exploring different options, you may wonder “how does a title loan work?” Keep reading to learn how car title loans work to give you the money you need.
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How Does a Title Loan Work?
Car title loans give you cash fast by using your vehicle's equity as collateral. You borrow money against the equity of your vehicle. Title loans require you owe your vehicle free and clear and don't owe money on it.
There are fees and interest with this loan. Typically, you have 30 days to repay this loan. If you can't repay this loan, your interest rates increase significantly, and if you miss payments, you could lose your vehicle.
You will still get to keep your car to drive during the loan as long as you repay the loan as specified in the agreement.
Qualifying for a Title Loan
As we mentioned above, you need to own your vehicle outright and not owe any money to a lender. Your vehicle is your credit, so you typically do not have to have a high credit score to qualify for these loans.
Title loans are secured loans because you have collateral, which is your car. If you don't have good credit, this could be an option for you. This is because there are usually no hard inquiries on your credit report when you get a title loan.
Different Types of Loans
States regulate car loans, and some states do not have car title loans. You can choose between two general types of loans—single or monthly payment. The loans are structured differently, so it really depends on your needs.
Requirements for Loans
You will need to have car insurance for a car title loan. The lender will also do an appraisal of your vehicle to determine how much loan you are eligible for.
You will also need a government-issued ID like a passport or driver's license. You will need to supply and show a lien-free car title.
Title Loan Amounts
You will have to answer how much you want to borrow during the application. Most loans are limited to about 50 percent of the vehicle value. You will have to make sure you can make the minimum payment for the loan when you determine how much you need.
If you are in need of money quickly, you can review your options. This article answered the question “how does a title loan work?” to help you decide if this is the right choice for you. Remember these loans are meant to be short term, so if you need a loan for a longer period, you may want to choose another option.
Keep checking out our site for other money tips and ways to save. You can also look at other money options to get the money you need.