What are car title loans? And when do they come into action?

The car title loans offer the best way to get fast cash. Different lenders offer different amounts one of the average cost brackets is from $100 to $10,000. But this quick cash comes at a price, and that is your vehicle. You have to place your vehicle as collateral for the loan. 

Secured loan and laws

The car title loans are a type of secured loan because the lender can take the ownership of your car if you fail to repay the loan amount in due time.

The laws and policies regarding the car title loans differ from state to state, but some things which are common among them are:

•    The lenders don’t check the credit score and history of the person.

•    The lenders don’t ask you for your proof of income.

•    They also require that the person has full equity in the vehicle.

•    Most of the lenders provide loan equal to the 40% or lower value of the car.

•  They also put a GPS tracker and a vehicle jammer so that the repossession can be more straightforward.

Working

To get the loan the person has to go to the lender with his vehicle, and after that, the sales representative of the company inspects the car and then offers him a loan amount equal to the 50% or less of his vehicle’s value. If the person agrees to the terms and conditions, then the lender asks the person to hand over his vehicle’s title to him so that the lender can repossess the vehicle if the person doesn’t pay back the loan amount and also installs the required hardware for the repossession.

Category

There are two types of the car title loans. One is the Single-payment loan, and the other one is the installment loan. In the single payment loan, the person has to repay the whole loan amount after thirty days, and it has an APR of 300%. On the other hand, the installment loans have an APR of 259%, and in these loans, a person can repay the amount within three to six months.

Caution

The car title loans surely have lower interest rates than the payday loans which come up with the APRs upward of 1,000%, but the interest rates of the car title loans are by no means that much lower. An APR of thirty-six percent is generally considered to be in the higher end of “manageable.” The fee and the mode of circular borrowing which is bound with these loans make them expensive.

If they are dangerous then what are the alternative options?

Although the car title loans are considered to be dangerous still, they have increasing popularity in the USA. According to the research, the number of these loans took a very high jump to 178% in the span 2011-2014. But still, people can avoid these loans by opting for some easy ways which have less risk associated with them like asking your close friends or family for a loan or by selling unnecessary equipment that you may have, etc.

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Created on Jul 27th 2018 23:21. Viewed 515 times.

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