How Do Car Title Loans Work and What Are Their Benefits?

You’re in need of some extra cash, but haven’t had luck qualifying for a personal loan without ridiculous interest rates. This issue is one a lot of Americans face as the ability to put money into savings keeps dwindling, yet the cost of living continues to rise.

A title loan on your vehicle could give you the money you need – and fast. Most states will let you borrow against your car so that you can get a quick loan, but you should know the facts before you jump into this option.

What is a Title Loan?

A title loan is much like a personal loan, except that you’re borrowing money from a lender against the value of your car rather than getting cash on the basis of creditworthiness. In other words, the lender will use your car as collateral should you default on your loan. Usually, you can borrow anywhere from a few hundred dollars to a few thousand dollars, depending on the value of your car.

Title loans can be good options for people who need cash fast, perhaps for a down payment on a home or to pay off an unexpected medical bill. They’re typically quicker and easier to get than a traditional loan, which usually requires a lot of paperwork and time spent with a lender.

How Do Title Loans Work?

If you’re interested in getting a title loan, you’ll need to take your title to a lender that specializes in these types of loans, or fill out an application online. Since you’ll need a title to complete the process, you’ll need to have full ownership of your vehicle and its title in your possession.

The lender will talk to you briefly about your loan needs and your vehicle. Most people can get a title loan within an hour or so of meeting with a lender, regardless of creditworthiness.

What Are the Benefits of Title Loans?

Why would you want a title loan rather than another type of loan? Here are a few important benefits of title loans:

  • A lender doesn’t have to check your credit, so you can even qualify with a negative credit history.
  • Once you pay off your loan on time, you might be eligible for another one if the need arises.
  • You can get your loan quicker than you can get other types of personal loans.
  • You can still use your vehicle if you have a title loan on it.

How Do Title Loans Differ from Personal Loans?

Are you unsure if a title loan or personal loan might be the better option for you? Both have their pros and cons and cater to different types of people and their needs.

A personal loan can help people afford various things they need, cover them financially in case of an emergency, or assist in paying off bills.

Personal loans, however, rely on an individual’s creditworthiness for a lender to make a decision. They can also be more difficult to obtain, requiring more documentation and application time. Some lenders will require a collateral for large personal loans, but you can usually get smaller ones with no collateral.

Title loans will always require your car as collateral. These loans are better for short-term lending purposes when you have a financial emergency. You’ll usually have a year or longer to pay off a personal loan, but most lenders usually only give you about 30 days to pay off your title loan.

Are There Potential Risks Involved?

As with any loan, there are risks involved with title loans. Most importantly, you could risk losing your car to repossession if you’re not able to pay back the money you owe your lender.

You’ll also likely have a very high interest rate on a title loan since it’s a short-term loan, which means you’ll end up paying back quite a bit more than you borrowed to begin with.

If you want to discuss whether a title loan might be right for you, you can visit https://www.tfctitleloans.com/, the TFC Title Loans website, to speak with an expert.