An auto title loan allows you to take money against the collateral of your vehicle’s title. You may have seen ads for such loans that are also known as pink slip loans or u-drive loans. Many people go for these loans because they are easier to obtain than the traditional ways of obtaining a loan such as from a bank. If you are also thinking to take such a loan, you would surely like to know how an auto title loan works. Well, there are several title lenders that specialize in lending money to people by using their auto titles as security. When you apply for a loan to such a lender, you give up the car’s title and, thus, possession in exchange for the loan although you can drive it as long as you continue with the loan payments.
In order to be eligible for auto title loans, you need to own a lien-free vehicle whose price is fully paid. Vehicles on lease or with outstanding payments will not qualify here. If you possess a vehicle, you need to have a title that you should present to the lender for starting the process. Before you contact the lender, try to learn about her or him through the official site. This will give you an idea of her or his experience, requirements, and what customers have to say about him through testimonies. As per the type of lender you are dealing with, you may need to bring a few other items like photo ID and proof of insurance. After gathering the required items, it is better to visit the lender where the process is executed quickly as it well streamlined.
Now, the lender will start by evaluating the vehicle’s value after which he or she may put forward a loan offer based on that value. There will be some paperwork but it will not be lengthy as in case of a bank. Title lenders usually need less paperwork due to which you do not spend the whole day in filling forms. In fact, you can be out in just an hour. This indicates that you can obtain the desired cash in just an hour unlike in case of banks that take weeks to give you money.
Depending on the lender, it will be decided whether a credit check will be done or not. There are many lenders who will never perform a credit check. Such lenders are useful if you have credit problems because they will not disappoint you like a bank. Once the entire process is over, the chosen lender will usually own the title but will not keep your car. The gained title is actually held temporarily until you repay the loan amount, which means you can continue to use your vehicle while repaying.
This is quite flexible when it comes to vehicle title loans. These can be offered with convenient terms for repayment. Usually, you have a time of 30 days to repay the loan but this is subject to change from lender to lender. You can choose to pay back quickly or spread the payments amongst months.
Whether to take an auto title loan or not is a personal decision that is subjective, as it is dependent on several factors such as your preference and repayment ability. However, a title loan is a useful alternative to a conventional loan in case you are in need of cash quickly or have a poor credit score. Such loans are meant for those who prefer getting instant cash without much hassle but have the ability to pay high interest and repay on time.
Author Bio: Sam Hiles is a blogger who prefers writing on topics related to finance and insurance. Right now, his hot topic of research is how does an auto title loan work. Sam recommends using title loans only in case of emergency due to high interest rates.