Title loans are small short-term loans given to consumers who sometimes have trouble getting an auto loan or cash through traditional sources because of bad credit. This blog article talks about the momentum this relatively new form of debt is gaining among individuals in a time where it can be challenging to beat the rates with traditional means.
What is a Title Loan? – the definition and how they work
A title loan is a loan that you get against the value of your car or other property. The lender will give you a loan in exchange for a security interest in the property. You must keep up with the payments on the loan and usually have to return the property to the lender once it's paid off. Title loans can be an expensive way to get a quick cash flow, so be sure you understand what you're getting into before taking one out.
Types of Title Loans
When you are in a bind and need some quick cash, think about Title Loans. Depending on your credit score and the lender you choose, different types of Title Loans may be available to you. Here's a breakdown of the most common types:
- Direct Loan: This type is available to people with good credit who have established enough income. You borrow a set amount of money from the lender based on the value of the car(s) being loaned. The interest rate for this type is typically high, but it's an option if you can't get a traditional loan elsewhere.
- Second Chance Loan: This type is for people who have had previous bad debt experiences. The lender checks your credit first and sets your interest rate accordingly. The loan amount is generally smaller than other types, but there are no fees or penalties if you don't repay it on time.
- Car title loans: These loans are based on the title to the car you are borrowing the money from. The APR for car title loans is generally higher than other types, but they offer more flexibility because you don't need to put up collateral. You can also take out multiple loans at once without having to wait long periods
Conclusion
Title loans are a great way to get quick access to money that you need, but don’t have the time or the credit score to get a traditional loan. With a title loan you simply put down an initial deposit and then borrow the remaining balance from your lender over time. Once you have paid off all of the installments on your title loan, your lender will give you back your original deposit plus interest. Title loans can be helpful for people with poor credit who need to get quick access to money for unexpected expenses or even just for a short period of time.
