How Does A Car Title Loan Work?
If you’re struggling to make ends meet, it’s important to know about every type of loan so you can decide which one is best for you. Most people are familiar with mortgages, small business loans, and other personal loans, but few know about car title loans.
A car title loan is a type of secured loan, which means it is supported by collateral. To obtain a car title loan, you must put the title to your vehicle up as collateral.
Who is Eligible?
The laws regarding car title loans vary from state-to-state. But in general, anyone who owns a car, motorcycle, or RV and is over the age of 18 is eligible for a car title loan.
What Will You Need to Apply?
The application requirements can vary depending on the lender. Most lenders require you to submit your driver’s license, the title to your vehicle, and proof of income in order to apply for a car title loan.
What Factors Will the Lender Consider When Reviewing An Application?
The lender will consider various factors when determining whether or not to approve your application. The two most important factors are your ability to repay the loan and the value of your vehicle.
Lenders will need to see proof of employment and income to verify that you are making enough money to repay the loan. If you aren’t earning enough to make regular payments, you will not get approved for a car title loan.
The value of your vehicle is important, too. Remember, the car is used as collateral to secure a car title loan. For this reason, the lender needs to know the value of the vehicle to ensure they don’t lend you more than the car is worth. In fact, most car title loans are equal to 25-50% of the vehicle’s value.
Lenders may or may not check your credit prior to issuing a car title loan. This loan is secured by collateral, so a bad credit score will not affect your eligibility.
Fortunately, it doesn’t take lenders very long to review applications for car title loans. Many lenders offer same-day approval so you can get the cash you need fast.
What Can You Do With the Money?
You get to decide what you are going to do with the money if you are approved for a car title loan. There are no rules or restrictions regarding how the money is spent, which is one of the many reasons why borrowers prefer this type of loan.
What Happens to Your Car?
The title to your vehicle is used as collateral to secure a car title loan, but that doesn’t mean you have to give up the vehicle in order to get the loan. The lender will not take your vehicle unless you stop making payments, so you are free to use the vehicle while repaying the loan.
Now you understand the basics of car title loans. Use this information to determine whether or not obtaining a car title loan is right for you.
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