When unanticipated or emergency expenses come up, you may need a way to get money fast. And if you have a vehicle to use as collateral (something you offer to a lender as a promise to repay a loan), you could be eligible for a title loan. You might be surprised to learn that title loans aren't only for cars, but also motorcycles, trucks, and other vehicles. Here we'll be answering what you've probably been asking yourself, how do title loans work?
What is a title loan?
If you own your vehicle, you may be eligible to borrow against the vehicle's value in what's called a title loan. Title loans are secured loans, meaning you offer collateral (your vehicle's title) to secure the loan. This means the lender can repossess your vehicle as payment if you fail to pay back the loan on the established terms.
What are the benefits and risks of using a title loan?
A title loan may be able to provide you the benefits of:
- Quick access to small amounts of cash: Title loans are approved incredibly quickly, frequently offering access to funds within hours. And since title loans are often for smaller amounts, they may be more feasible to pay back than a larger loan.
- A simple application process: You can generally walk into a title loan establishment and find out if you're approved in under an hour.
- Retaining access to your vehicle: This can be especially important if you use your truck or larger vehicle for work — you can continue to drive it while you pay back the loan.
There are also some downsides to using a title loan, including:
- High interest rates: Interest rates will vary by lender, but often these short-term loans come with a hefty price tag. So you'll want to be sure you can pay back the loan on schedule to avoid getting hit with even more interest.
- Risk of losing your vehicle: You may need to forfeit your vehicle if you can't pay back the balance due promptly.
How do I qualify?
Lenders offering title loans generally have a short list of requirements. Lenders want to see that you own the vehicle outright and have access to its lien-free title. Lien-free means that you don't have any existing loans on the vehicle or any parking tickets or other fees. If you meet that requirement, lenders often don't check credit scores or income, making title loans reasonably simple in terms of qualifications.
What should I look for in a title loan?
As with any loan, you'll want to shop around with vendors as some title loans are more favorable than others. Look for a loan that:
- Promises no pre-payment penalties
- Understands the value of your motorcycle, truck, or other vehicle and can offer a fair loan amount
- Allows you to maintain access to your vehicle during repayment
- Has clear repayment terms and fixed interest rates
- Has no hidden fees
If you're in a bind and need money fast, title loans for your car, motorcycle, or truck are just one option. Depending on your credit score and income, you may be eligible for other types of loans, as well. Before making a commitment to a title loan, make sure you have a solid plan in place for paying back the loan so you won't lose your vehicle in the process.
Notice: There are a wide variety of loan products available in the marketplace, so your choice of lending products should match your financial needs. Small-dollar loans used over a long period of time can be expensive.
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Original Source: How Do Title Loans Work With Motorcycles, Trucks and Other Vehicles?
