Bad credit can seriously impact and limit your borrowing options. There are many individuals, families and households that are unable to take up a loan due to a poor credit score or no credit history.
Thousands of people may be unable pay back their debts or may get late in repayments when the economy is unstable.
In such situations, anyone can find themselves in need of urgent cash or an instant loan. This is where car title loans can be a useful option. This guide will walk you through everything you need to know about car title loans when you have a bad credit.
What is a Car Title Loan?
Same day auto title loan, car title loan, or simply title loans are short term loans where your car is held as collateral. Lenders are able to look past your bad credit score because you pledge your vehicle as collateral.
These loans are easy to acquire and can be for as high as $50,000 depending on your car’s value and the state you are interested in borrowing from. They are often referred to as instant loans because approval can take just a few minutes. These loans are generally for 30 days and are very useful to take care of short term cash needs.
One major benefit of short term loan is that you pay less money in terms of interests. Apart from looking past your credit score, a same day auto title loan in most states do not require proof of income as well.
The amount you can borrow depends directly on the equity you hold in your vehicle. You can borrow a larger sum with a higher equity value.
These loans can either be paid in a lump sum amount when the loan becomes due, or rolled over into new loans and paid in installments. This benefit is helpful to those borrowers who are unable to obtain a long term traditional loan because of bad credit score.
Credit risk is a major consideration when approving for a more traditional type of loan. However, same day auto title loans use the value of your car and your ability to repay the loan as primary basis for evaluation. Lenders are comfortable by adding their name to the title for the duration of the loan. The name is removed cleanly when you pay the loan back.
You do not have to keep your car in lender specified storage in car title loans. You have complete access to your car as before. It is recommended that you have insurance on the vehicle. However, many lenders do not stress this.
But you cannot drive a car without insurance. People that do this are breaking the law and taking a financial risk that is just not wise.
How to apply for a car title loan?
Same day auto title loan can be applied either online or at physical storefronts. The process is quick and easy. Most lenders have a streamlined approval process to make it as simple and convenient as possible.
Make sure you apply to multiple lenders at the same time to save time and get the best rates. Unlike traditional loans, car title lenders do not perform a hard credit check. This protects your credit score from getting lowered by a few points. It’s also smart to do some bad credit loans reviews in your area to see which borrowers have the best experiences with which lenders.
Your bad credit score will not affect a lender’s decision. However, your car’s value and condition will. If you are applying online, make sure you attach a few pictures of your car if it is in good condition. This will improve your chances of obtaining great loan terms.
You need to make sure that your car is registered in the same state where you are applying for the title loan. Most states have their own set of regulations regarding car title loans. It can be helpful if you know these regulations.
You need to be 18 years or older to be eligible for a same day auto title loan. You should also have a free and clear title to your vehicle. This means there should be no lien or loan on the vehicle title.
There are a few lenders that will approve a car title loan if you have a standard auto loan. However, the loan amount will be based on the equity you hold in your car.
lenders have a free loan application process and complete the approval process within a few hours. However, the process can get complicated if you are a co-owner on the car title.
Lenders require both owners signature on the car application form. This can be ignored if there is an ‘or’ between the two owner names.
How to Find a Lender?
There are a number of online lenders as well as physical storefronts. It is important that you find a lending company that is safe and reputable. When you apply for a same day auto title loan, the lender evaluates the car value and offers a loan amount based on that value. As mentioned earlier, searching for bad credit loan reviews in your area is a good place to start!
Other terms of the loan agreement include interest rate, loan duration, and any other fee/s. Lenders are free to charge their own rates based on your risk profile and car value. Hence, it is important that you shop around for the best rates!
Find a reputable direct lender if you want cash, fast. Make sure you find out the payment options before you apply. You need to find out whether the lender provides an option of roll-over or loan extension in case you find yourself in a financially tight spot.
You need to make sure that your lender is licensed to offer title loans in your state. There are individual state requirements which need to be met by a lender for registration.
What Documents Are Needed?
Approvals in car title loans are quick to come. Most borrowers get the loan amount in their bank account within 24 hours. You can quicken the process by making sure you have the documents ready.
You will need a government issued identity proof and original car title. Some lenders might request for evidence of insurance and proof of income keeping in line with state requirements. Income can be shown by way of recent pay stubs.
You can show proof of alternate income streams such as unemployment benefits, retirement benefits or disability benefits if you do not have a job. Child support is also considered a source of income by many lenders.
You will also have to provide a residence proof. This can be utility bills, credit card bills, or local magazine subscriptions among others.