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What Know About Title Loans

Updated on February 8, 2019
George Talbot profile image

Anderson is a writer and investor who graduated from the University of Michigan with a degrees in Political Science and Economics.

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Life comes with unexpected twists and turns and when finances get out of hand, it's important that you know all of your options. If you don't have a great credit score, it can be hard to find a loan that can get you the money you need.

Luckily, one option that will be available to you as long as you own a vehicle is a car title loan.

So what are car title loans, and how can you get one? The answers are quite simple.

Basically, a car title loan is a secured, short-term personal loan that is directly tied to the value of a vehicle you own. While car are obviously the most popular form of security used in a title loan, title lenders will typically accept other vehicles as well. RVs, trucks, motorcycles, boats, and more could get you the loan need.

If you are interested in taking out a car title loan, getting started can be as easy hopping online. Most title lenders these days operate online, meaning you can share your necessary documents, divulge information about your car, and get an estimate for your loan completely online.

So what do you need in order to take out a title loan? Here are the related documents:

  • a government issued ID
  • a lien-free title with your name on it
  • proof of income to prove that you can pay back your loan
  • proof of your car's value

In order to prove your vehicle's value you will likely have to do one of three things. Your lender will either ask you to share photos of the exterior and interior of your car, share a video of the exterior and interior of your car, or take your car to your lender's storefront location for an in-person inspection.

Typically, the value of your loan will be worth somewhere between 30 percent and 70 percent of you vehicle's value. If you are interested in getting a preview estimate of what your vehicle will be worth, just head over to Kelley Blue Book's website and enter your vehicle's information. While the exact value of your car will be dependent on mileage, exterior and mechanical quality, and more, KBB can be a very helpful resource.

Once you agree to take out a title loan and sign the necessary documents, you will trade in your title and get your cash loan within the hour! You will be able to drive and operate your vehicle as usual, but your lender will hold on to your title until you pay back your loan plus interest in full.

Speaking of interest, it is important to know that title loans typically have relatively high interest rates. In fact, the average APR for title loans across the country is 300 percent. That means that even if you take out a title loan for just a month (which is the most common payment term), you will be expected to pay back 25 percent interest.

So, if you take out a loan worth $2,000, you will have to pay back $2,500 by the end of your term to pay off your loan and get your title back.

If you are unable to pay off your loan in time, you could have the option of rolling over your loan for another term, but that will come with more interest payments as well. If continue to be unable to pay off your loan, you could face the worst repercussions of a car title loan, which is repossession of your vehicle. If you are safe and responsible with your finances, however, you will likely be able to avoid this nasty outcome.

In the end, car title loans are usually only for people who are facing a financial emergency and have nowhere else to turn. While they come with risk, it is good to know that you have a title loan as an option if your absolutely need it.

Speaking of interest , it is important to know that title loans typically have relatively high interest rates.

In fact, the average APR for title loans across the country is 300 percent. That means that even if you take out a title loan for just a month (which is the most common payment term), you will be expected to pay back 25 percent interest.

So, if you take out a loan worth $2,000, you will have to pay back $2,500 by the end of your term to pay off your loan and get your title back.

If you are unable to pay off your loan in time, you could have the option of rolling over your loan for another term, but that will come with more interest payments as well. If continue to be unable to pay off your loan, you could face the worst repercussions of a car title loan, which is repossession of your vehicle. If you are safe and responsible with your finances, however, you will likely be able to avoid this nasty outcome.

In the end, car title loans are usually only for people who are facing a financial emergency and have nowhere else to turn. While they come with risk, it is good to know that you have a title loan as an option if your absolutely need it.

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