If you’re strapped for cash, taking out a title loan on your car is a solid option to get a lump sum of cash regardless of your credit score. While it seems like a great option to help dig yourself out of a hole, there are some things you should know about completely online title loans to make sure that you are borrowing responsibly.
First off, let’s go over exactly what a title loan online only is. Essentially, a completely online title loan offers quick cash – usually between $100 and $10,000 – in exchange for your vehicle’s title as collateral. It’s a secured loan tied to the value of your car. Because of that, if you don’t pay back the lender on time, or default on your loan, the lender is legally allowed to take your car.
What makes car title loans attractive to those in need is that they are fairly non-restrictive. Lenders don’t check credit and can get you your money within hours of you submitting an application. They do, however, require that the car be owned outright and may require that the borrowers leave a key or install a GPS tracker or a remote immobilizer.
Despite the risks, there are some truly great things about the potential of what a car title loan offers. Read on to get more facts about the risks and rewards of taking out a car title loan online only:
1.They Truly Are Completely Online
You might be wary about the fact that these loans, that can range to several thousand dollars, might just be completely online title loans in name, and not in actual practice. The truth, however, really is that you can apply, offer your documents, even have the value of your car determined by your lender all online. Even after you are approved you don’t have to go to some brick and mortar establishment to gather your funds. Many title loan online only lenders will deposit your loan into your bank account once you are approved. You can do it all without even leaving your couch! Read our guide to find the best online lenders.
2.Title Loans are Banned in 25 States
Yep, half the country doesn’t even allow car title loans. Due to their short terms, balloon repayments, and high APRs, title lenders are only allowed in specific parts of the country. This is definitely something to consider before you apply for a car title loan online only.
Firstly, you have to find out whether or not you’re even able to get a title loan depending on the state you live in. Beyond that, you should probably consider whether or not you want to engage in something that half of the country has decided should not be legal.
If you are really determined to take out a car title loan, you may want to look into the specific laws of your state. While they may be illegal on the surface, there are several states that allow car title loans thanks to loopholes. It is a good thing to keep in mind if you are determined to take out this kind of loan.
3.You Can Keep Driving Your Car Throughout the Life of Your Loan
Upon hearing that car title loans are collateral loans in exchange for your car title, you might worry that this might mean that your car is going to have to either sit in your garage, or in some lot somewhere.
The great thing about completely online aiuto title loans is that while you do have to give up your car title for the life of your loan, you do not have to sacrifice your car. You can keep driving your car as usual. Just make sure you make your payments on time, and it’ll be like you never took a loan out at all!
4.An online “Title Loan” May Not Actually Be a What it seems
Doing the research is crucial when preparing to take out a completely online tile loan. Even if you’ve decided that you’re willing to take on the risks that come with taking out a car title loan, you have to make sure that you are not falling victim to a lender who could be offering something very different. In states such as Missouri and Virginia, there have been reports of consumers taking out what they thought was a title loan, but ended up being something very different.
These kinds of loans have been named things such as “consumer installment loan” or a “consumer finance loan.” They are far less regulated than car title loans, and can be structured to last much longer and may have unlimited interest. These are crucial to avoid even if you’re in the market for a car title loan.
5.Title Loans Have an Average APR of 300%
A loan’s annual percentage rate, or APR, measures how much a borrower would spend on a loan in interest if the loan were outstanding for a full year. What that 300% APR means is that, if you would pay 3 times what you originally borrowed in fees and interest in one year.
Technically these loans are only supposed to last a month with a 25 percent monthly interest rate. Where people get in trouble is when they can’t pay the loan back that fast. That leads to the loan rolling over to the next month with another 25 percent interest. Before you know it, you’re well on your way to actually having to pay that 300% APR. This can create a dangerous cycle of debt that can leave you in more trouble than you were before you took out the car title loan to begin with. Rates vary from state to state so see here for title loan laws by state.
6.Car Title Loans Can Help Improve Your Credit
One of the primary reasons why individuals take out car title loans is because they have bad credit. Even if you can take out a title loan, however, doesn’t mean that you should be working to improve your credit for the future. While improving your credit score typically takes years, car title loans can actually go a long way in helping you.
If you are hoping that your car title loan will work to improve your credit score and borrowing history, just make sure that the lender you are borrowing from reports to the major credit report bureaus. That way you’ll killing two birds at once by getting the money you need and improving your credit history in the process!
7.1 in 5 Title Loan Customers have their car at risk.
When a borrower cannot pay back their loan, the lender has the option of repossessing their vehicle as collateral. According to a study by the Consumer Financial Protection Bureau, that is precisely what happens to one in every five title loan borrowers.
“You’re not just paying an interest rate — you risk losing your car,” says Liz Weston, a NerdWallet columnist and financial advisor. “The repossession rate on these loans is incredibly high, and people lose their jobs because they can’t get to work.” Some loans can be offered with no phone calls and no inspections, that does not mean that there are no phone calls when lenders are trying to get a hold of you for repayment!
Taking out a car title loan can definitely be a useful option to consider, but you have to be aware of the risks involved and you have to be confident that you will be able to repay your loan, plus any interest you accrue. That is, if you don’t want to risk losing your car to repossession.