Understanding Auto Title Loan Terms
If you haven’t researched how auto title loans are structured, you could find yourself confused. To be clear, these loans can be very expensive with fees and hundreds of dollars in interest. Before you go down the route of signing-up for an auto title loan, please consider the reason(s) why you need a large sum of money. You will be using your car as collateral to access the funds you’re looking for.
There are many reasons why someone may need to use their car as collateral. As a borrower you may need these funds if you’re at risk of defaulting. However, you need to remember that if you default on an auto title loan the loan provider will take your car. If you need your car to earn a living, please consider this risk. You do not want to default on this loan. The interest and payments you are setting yourself up for can be quite large. You certainly don’t want to put yourself in a financially negative position. It can be scary, so we urge most people to look at other options before you consider signing-up for one of these loans. Signing-up for high interest loans (which these are) is not the best way to getting out of a financial hole.
This industry is a billion dollar a year business in collecting fees and interest. They typical auto title loan is set for a few months to a couple years and if you default on your loan repayment, these lenders can take your car. If you’re applying for an online auto title loan, they will look at your credit history and your ability to repay the loan. A lenders most common approach to determining how much you can borrow is based on the market value of your car. They’ll grab this information from Kelly Blue Book or some other third party company.
No one will go into a contract expecting to default on a loan; however, you should ask the lender what protection you have if you do default on a loan. There is typically a time frame that protects the borrower from the lender reselling your car immediately. The more you understand the terms the better off you’ll be in making an informed decision.
Every state is different to the maximum amount a lender can charge in interest charges. Some are as high as 80%, but most states have a maximum of 36%. You’ll need to check with your state to see what their maximum is. With these high interest rate charges we highly recommend that you exhaust all other options in getting the cash you need before setting your vehicle up for collateral on a high interest loan.