It is important when considering whether a car title loan is good for you, whether you qualify. While lenders have many different criteria for qualification, the following are particularly important:
Your car must be owned free and clear. In other words, you cannot owe another finance company money on your vehicle. You must have reliable income. You need to have a driver's license. For larger loans, many lenders require proof of insurance.
As you can see, its pretty easy to qualify if you own your car. Many people love the product. It is simple to understand and it gives you access to quick cash. Many people in the past have not considered using their automobile as a means to access credit. It is odd that this product did not find more mainstream use earlier on. For decades Americans have been using the equity in their homes to borrow against, and now many people have discovered they can use the equity in their automobiles. as well.
These types of loans do not come without significant risks. The biggest risk, obviously, is if you are unable to pay back your loan. In that instance, there is the risk of the lender repossessing the vehicle. Obviously this is not what the lender or the borrower wants. It's important you do not borrow more than you can afford. The interest is very high and can add up quickly. For some people, a better option is to sell their current vehicle and buy another, less expensive vehicle. While this is time consuming, it may be the best outcome if your income situation is not stable.
If you do fall behind on your payments or are going to be late, communicate with the lender! Lenders, like all of us, do not like surprises when the surprises have bad news attached to them. A mistake many people make is that they try to avoid the awkward situation. With a car title lender however, this sends a worrisome message. The message received from the lender is that you are not making payments on time and maybe are trying to leave town or "skip" on them. This is a big risk for the lender, and if you are being unresponsive, they may move more quickly to repossess your car then they would if you were communicating with them. Most lenders do not want to repossess your vehicle. Explain your situation and work on a payment plan. It needs to be a reasonable plan for the lender however. In most situations, the value of your vehicle is worth more than the size of the loan. Use this to your advantage and borrow money from friends or family, for example, to repay the loan. You would not want to lose your $5,000 vehicle because of a $3,000 loan.
Car title loans and auto title loans can be a great tool for managing your cash flow, but they come with risks. Make sure to approach them with open eyes and a real understanding of your own financial situation. It is also important to find the lender that works well for you. There are many established storefront lenders. While many people are comfortable with this, some new lenders have opened recently that will send one of their representatives to meet you directly, wherever you are most comfortable. This is a convenient option for those that are not near a storefront lender or are not comfortable with their locations.
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