4 Questions to Ask Before Taking Out a Car Title Loan
Taking out a loan or borrowing cash is the easiest solution when you are stranded for cash or during emergencies. Getting a loan from traditional lending companies such as banks can be difficult if you have a negative credit score. This necessitates looking at other loan options, such as car title loans. A car title loan is a short-term loan based on your vehicle’s value and uses your vehicle’s title as collateral.
However, like any other loan, it is crucial to do your due diligence to determine whether or not a car title loan is right for you. Here are four questions to ask before applying for a car title loan.
1. Does the car title have to be in my name?
To qualify for a car title loan, you should hand over your vehicle’s title to the lending company, and the lender becomes the car’s lien holder. However, the car title loan must be in your name for the loan to be approved. For car titles with more than one name, the borrower’s name, alongside another person’s name, you must consult customer care or the relevant authority to determine whether or not you should proceed to file for the car title loan.
2. Does your potential lending company offer competitive interest rates?
The interest rate is one of the most significant factors to consider before taking out car or travel trailer title loans with any lending company. It indicates the amount you should pay in addition to the loan’s cost. Different lending companies charge distinct interest on car title loans, so you should invest your time shopping around for lenders that offer affordable interest rates. Determining the interest rates beforehand helps you evaluate whether you can repay the loan within the specified timeframe.
3. Do the potential lenders have any hidden charges?
While choosing a company with lower interest rates relieves your loan burden, you should be careful not to select a lender with hidden fees that could add up throughout the loan term. Before signing the contract, you should carefully read the fine prints. Are there charges up front? Does the lending company charge late payment fees, and how much?
Be sure to get quotes from different car title loan lenders to compare which company is best for you. Avoid lenders reluctant to disclose the additional charges you may encounter or are unwilling to provide a quote.
4. What happens if I cannot repay the car title loan?
Be sure to familiarize yourself with all risks involved in car title loans before applying. For instance, if you cannot repay the principal and the additional fees, some lending companies may roll over your debt into a new one. However, you will incur more additional charges and interest on top of what you already owe. If you keep on rolling over your debt, you could incur a significant amount of additional costs that could make it challenging to repay the debt. This results in the lending company repossessing your vehicle.
A car title loan provides an easy and fast way to get cash during financial emergencies. However, ensure that you can repay your loan to avoid car repossession. You should also shop around for lenders with competitive interest rates.