How Do Title Loans Work?
What Is a Title Loan?
Title loans, also known as cash loans, are ideal for people who can’t qualify for other loans. They are popular because they can get approved very quickly. With a title loan, you put your car or house up for collateral, and get a credit line worth around 50% of the value. You still keep the car while you have the loan and if you don’t pay back on time, you may have to forfeit your assets. But don’t worry, the companies that offer these loans offer grace periods before this happens. You won’t have trouble finding a provider as many companies offer title loans.
Can Anybody Get One?
Title loans are made for almost anyone. If you have a car or a house and you are seeking a loan, you meet the qualifications. Typically any car and most houses are accepted. These assets are then put up for collateral. That way the company is financially protected if you miss a payment. Some title companies have age limits or other requirements. But as there are many providers out there that have different rules, you might qualify for another company if someone rejects you. Credit score isn’t a factor with title loans so those with bad credit can get one too.
Why Is the Interest so High?
With cash title loans, you’re essentially getting a loan from a private party. Banks have specific guidelines to follow regarding loans, and that's why they can offer such low interest rates. Those with higher credit scores who have a history of on time payments can get lower interest rates because of a good credit history. Title loans are made for those with either bad or no credit scores and that is why the interest rate is so high. However, you can avoid paying high interest if you pay off your loan on time. Keeping track of the payment schedule is important.
What Are the Benefits of Title Loans?
Title loans are chosen over other bad credit cash lines for several reasons. The first is that it’s much easier than other options like payday loans or cash advances. The only thing you need to apply is a car or house title. With these loans, you can get a large cash advance typically the same day you apply. These loans are great for rent, car repairs and housing repairs. Some people also use them for short term investments like training courses or certifications. When you apply for one your income, employment and credit score aren’t considered making it the best option for those having financial or employment issues.
Do They Affect a Credit Score?
Title loans don’t require a credit score to get which is why many people think that they don’t affect your credit. However, this isn’t necessarily true. Any type of loan, even title loans, can damage your credit score if you don’t pay them on time. While they may not affect it as much since you put up collateral, don’t think that missing a payment is a good idea. These loans are made for people with bad credit so properly paying off the amount owed without missing payments can improve your score. If you improve your credit score you may qualify for better loans.
