Car title loans are popular financing methods. Think of a car title loan as a financial security blanket in an economic pinch. They are a form of secured lending that allows you (the borrower) to offer your vehicle as collateral to the lender. The lender assesses your vehicle and, as a result, lends you an amount equivalent to its value.
It’s similar to a bad credit loan, which eases your financial burdens. However, once approved, you must repay the loan (with interest) by a predetermined date. If you fail to repay the loan, the lender retains the legal right to repossess your vehicle to regain the lost amount.
Car title loans have good, bad and even ugly sides, like all financing. Here’s what you need to know before applying.
The Good
If used responsibly, car title loans can benefit borrowers. For example, you may require additional cash if you experience an emergency, such as a hospital visit or legal bills. As such, a car title loan can buy you time until you regain your financial bearings.
Also, car title loans are excellent if your credit history is less than flawless. And lastly, car title loans are among the more advantageous payday loans since the interest rates are usually lower than other options.
The Bad
Unfortunately, car title loans do have some drawbacks. Due to some unethical lenders exploiting hard-pressed borrowers, consumer advocates consider car title loans a form of predatory lending. Moreover, car loans are notorious for their steep interest rates.
Adding insult to injury are fees. Car title loans have massive late, document, processing, and origination fees.
The Ugly
Many lenders are outright ugly; some offer borrowers the (initially) welcoming option of interest-only payments. This predatory and deceitful option allows borrowers to pay the interest for a predetermined period. However, as the loan finishes, the total amount comes due.
Roll-overs are another ugly aspect of car title loans. If borrowers default on their loan near its end, interest accumulates until the loan is paid in full. This option can result in a nasty debt cycle if borrowers aren’t cautious.
Using Car Title Loans Responsibly
Car title loans (despite the good, bad, and ugly) are still common types of secured lending. And as long as you protect yourself by using them responsibly, a car title loan can be the solution you’ve been looking for. So if you’re considering using your vehicle as collateral to borrow money, Mr. GOODLoans can help. We offer flexible payment options, low monthly fees, and short and long-term loans. Contact us today to apply for your (good) car title loan.
