The Pros and Cons of a Car Title Loan

For many people, a car title loan is a huge benefit but as with any loan, people need to have a full understanding of how the loan works to determine if it is the best decision. One of the primary benefits to a loan such as this is that a person can come up with quick cash simply by using a car title as collateral. The lender of a car title loan would hold onto the person’s title until the loan has been paid in full at which time it would be returned to the owner.

As with any loan, a car title loan has good and bad dynamics. Understanding these is what helps educate so appropriate decisions can be made.

Pros

Some of the main advantages associated with a car title loan include the following:

  • Fast Cash – Typically, a person could walk into a brick and mortar lender or go online to a reputable lender and have money in hand fast. In the case of taking out a loan in person, the title would be handed over to the lender, paperwork signed, and within a 30-minute period, the individual walks out with a check or cash. In the case of a car title loan online, the process is also easy but getting the money takes a day or two in most instances while the lender waits to receive the car title.
  • Good and Bad Credit – One of the greatest fears people have about applying for a loan is being turned down because of bad credit but in the case of a car title loan, credit is not even considered. Because of this, people with liens, judgments, and even bankruptcies can still get a car title loan. In fact, most lenders of a loan such as this never even run a person’s credit history. The reason credit does not matter is that the lender has the person’s clear car title in possession.
  • Keeping the Car – Just because a person turns a clear title over for a car title loan, the car is not taken. This means a person would still have needed transportation for getting back and forth to work, school, or simply going on vacation or driving to see friends. The owner of the car would maintain possession of the vehicle throughout the life of the loan.

Cons

Just as there are numerous benefits of a car title loan, people should also look at the negative side, which will help them make the right decision.

  • Fraud – While most lenders that offer loans like this are on the up and up, unfortunately, some companies are not so honest. Sadly, some people needing money have turned to what they believed to be a professional and reputable lender for a car title loan only to find they were scammed. People can ask for credentials, references, and conduct research to make sure the lender they want to work with is safe and secure.
  • Deceit – Another potential problem associated with a car title loan is that again, a small number of lenders take advantage of people. For instance, the lender might make the loan so appealing that everyone goes for it but what the borrower does not realize is that he or she was only provided with half-truths. Sure, the money would be what the lender said, and the interest rate is what was agreed upon, but when the loan comes due, the borrower is blindsided with outrageous and undisclosed fees. Since the applicant signed documentation without reading the fine print, he or she is locked into a mess.
  • Interest Rates – Many of the good lenders for a car title loan work hard to get borrowers the best interest possible but the challenge is that the Annual Percentage Rate or APR is used for calculation. However, since this type of loan is meant only as a short-term solution, interest can add up quickly. Because of this, it pays off for a person to look at two, three, or even four possible lenders to get the best loan and lowest interest rate.
  • Losing the Car – The worst-case scenario with a car title loan is losing possession of the car. When the loan is not repaid, the lender has the title and by law, can repossess the vehicle. Now, if a borrower runs into a problem in paying on time, reputable car title loan lenders generally work with the individual to get them through the rough situation.

As long as a highly qualified lender is chosen, a car title loan is beneficial. Whether needing money to make a home repair, pay a past due bill, pay expenses for a wedding, funeral, or child going off to college, or even wanting to take a much-needed vacation, the money is easy and quick.