What You Need to Know About Title Loans Near Me
If you have financial problems and your plan is to apply for a loan, you may consider applying for title loans near me since you can use your car title as collateral. In a title loan, you must have an asset to be used as collateral. There are two good reasons why this loan type is popular. First, title loans do not check an applicant’s credit rating. Second, the lender can quickly approve title loans for as low as $100.
For example: In your car title loans or motorcycle title loans, a lender allows a borrower to place a lien on their titles, and temporarily surrenders the hard copy of their vehicle title, in exchange for a loan amount. After the loan is repaid completely, the lien is removed and the title is returned to its owner. If the borrower does not pay monthly dues, then the lender repossesses the car and sells the vehicle to pay the borrowers’ outstanding debt.
About title loans
Typically, loans are short-term compared to other credit sources that carry higher interest rates. In title loans, lenders do not check the borrower’s credit history or income for these loans and only look at the vehicle’s value and condition. Lenders say that their interest rates are lower because of the secured nature of the loan. To prove their point, they identify the increased threat on this type of loan process that is utilized by most borrowers who are already undergoing financial problems.
Most title loans can be acquired in 30 minutes or less on loan amounts as little as $100. Traditional financial institutions are not giving loans under $1,000 to applicants without any credit reference as they consider these loans unprofitable and too risky. In addition to making sure of borrower’s collateral, many lenders require that the borrower is an employee or has a regular source of income. In the title loan application, the borrower’s credit score is not considered by lenders.
This is the major reason why auto title loans seem so attractive. After you hand over your car title as collateral, your application will be approved for a title loan regardless of your credit score. This sounds like the perfect deal if you decide to take out a maximum loan amount to pay for a pending emergency obligation or just everyday expenses.
More facts to know about title loans
- Title loans are forbidden in 25 states
25 percent is one fourth of the entire state. Title lenders are allowed to operate in only a handful of states due to their short-term repayments and high APRs.
- Title Loans have an average Annual Percentage Rate (APR) of 300%.
Look at the loan’s APR to find how much it costs a year. Using an average APR of 300%, the cost of your typical title loan is multiplied three times the original amount borrowed, inclusive of fees and interest. Their loan keeps rolling over since the loan cannot be repaid on time. They are scoring for another month in exchange for an additional 25 %.
- “Title Loan” is not considered a title loan
As reported, in states like Missouri, South Carolina and Virginia, only title loans are allowed.
In May, 2016, the Consumer Financial Protection Bureau (CFPB) announced that more than 80% of title loans are the result of rollover. It is understood that title loan industry does not only get profit from customers’ inability to pay their loans, but they depend on it. Since most clients are not able to pay their loans at once, so the loans have to be refinanced to keep it from defaulting.
- The fact is, 1 in every 5 customers of title loans eventually loses their car
When customers fail to settle their title loan, the lender takes the vehicle and based on competitive rates that would cost around 20%. If a reliable source tells you that you have 20% chance of losing your car, would you still sign the contract?
Understanding the risk of title loans
Car title loan amounts are normally $1,000, although they can be higher. Borrowers can pay title loan of cars can with a single payment after a month or repay the loan using an installment plan for two years. If a borrower cannot repay based on agreement, the car is immediately repossessed by the auto loan title company. The loan company permits a borrower in default to pay the interest-only payments for a month period and roll over the amount of the loan indefinitely until it is settled.
For example, a car title loan of $5000 that is payable in 24 monthly installments can carry more than 100% of APR or more. With a 108% APR, a 24-month car title loan will cost the borrower the amount of $7,394 in interest charges alone on top of the initial $5000 principal and for the total cost of $12,394.
Why should you not get a title loan?
Title loans are over-secured only for the lender and not for the borrower. Typically, most lenders will give you the maximum amount of 25 to 50 % their assessment of your car’s worth. However, if you obtain a loan, you get 25% of the loan. If you cannot pay, they sell it and keep 100% of the profit. Either way, you are the loser. Find other ways to get a loan.