For those of you who have heard of car title loans, but yet you aren’t sure what they represent, let’s start with the fact that they are short-term loans in which the borrower pawns their car (or any other vehicle that it’s in their possession) as collateral.
These loans are known as auto title loans as well, and they enable you to borrow up to fifty percent of the value of the vehicle that you pledged to the lender. There are numerous reasons why so many people decide to apply for car title loans.
One of the most common reasons is because they provide them with a quick financial solution whenever they urgently need cash. Now that you’re familiar with the basics, let’s dive more into the information that is going to give you some perspective from a legal side.
How Do They Work?
As stated in the beginning, these types of loans allow you to borrow up to fifty percent of the value of your vehicle. In return, you must pay off everything, along with the interest before the loan term ends, which is normally somewhere between fifteen to thirty days.
In order to qualify for these loans, you need to give the lender your vehicle title. Depending on the lender that you picked, some will require that you are a full owner of your automobile, while there are those who are a bit more flexible and will lend you cash if you meet a particular equity threshold.
In addition, you’ll need to give proof of insurance to the lender, along with the photo ID, and additional set of keys. One of the best things about car title loans is the fact that you can get the money without anyone checking your credit score, or verifying your income, which is why all of this makes them so appealing to many.
What Are The Requirements?
When it comes to the initial requirements, it’s safe to say that they are pretty easy to comprehend. However, understanding title loan requirements is essential if you want to be sure you do not make any mistakes along the way. So who’s eligible to apply for them?
You must be at least eighteen years old or older
Have a title to a qualifying auto or truck in your name – This is one of the most important things as far as this is concerned. No lender is going to take you into consideration if the vehicle isn’t in your name at the time of your application. If you must transfer a title to your name, or you must acquire a duplicate title, then you’ll need to go to the local Department of Motor Vehicles.
Prove that you can repay the loan – Since your income is one of the best proofs that you are capable of repaying the loan, you are obligated to submit proof of it. If by any chance, you do not get pay stubs from a conventional job, don’t worry! There are other sources of income that can serve as proof of your ability to repay the loan, such as Supplemental Security Income, Retirement Income, Workers’ Compensation, Child Support, and Settlement Income.
The Importance Of Safeguarding Yourself
This segment refers to the borrowers. Since car title loans can be a very complex instrument, it’s of huge importance to get your facts straight before making any further steps. In other words, you need to be familiar with all the risks, and legal implications that are involved.
These types of loans are governed by certain rules that can vary, depending on the state you live in, which is why it’s pivotal to get familiar with the applicable guidelines in your state. By doing so, you will properly protect your rights, and prevent dealing with any loan-related issues.
One of the most important things that you should do is to go through the loan agreement before you sign anything. Pay special attention to the terms and conditions, including repayment schedules, and interest rates.
In these types of situations, the more you know, the better. By educating yourself when it comes to different legal nuances, you will lower the risk of dealing with various legal pitfalls that often come with title loans.
What You Need To Know About Interest Rates And Fees?
As far as the interest rates are concerned, they are usually higher with title loans, in comparison to some other types of loans because of the various risks that are involved. If you decide to apply for them, then you need to know how much you’re supposed to repay.
Lenders charge relatively high rates because they want to decrease the risks of having potential losses if a borrower fails to repay the loan. Furthermore, fees may vary drastically as well, including:
Late payment penalties
Origination fees
Extra charges when you extend the loan term
Different Ways You Can Secure Better Terms
Securing the most suitable terms is essential when opting for car title loans. There are several things that you can do to reduce the fees you’re supposed to be paying:
Do your homework, with the goal of finding the lender that provides the best policy and rates
Do not be afraid to bargain for extended repayment periods, lower interest rates, and/or decreased fees
Pay off the loan as soon as you can
If you are struggling financially, then it would be advisable to contact a credit counselor
If you are convinced that you’re not getting a good deal, then do not hesitate to seek legal assistance
What To Do If You Struggle To Make Payments?
If you are struggling to make payments, then one of the best things that you can do is to talk to your lender to see if they can restructure repayment plans, or provide you with a temporary relief. If you want to accomplish any of these things, then you need to be honest about your current financial situation.
There’s no denying that car title loans are a good option for anyone who needs a “quick fix” when it comes to money, however, if you want to prevent any major risks, then you need to get familiar with everything that was mentioned today.
The post 6 Must-Know Legal Facts About Title Loans appeared first on The Romania Journal.
