Before getting into the nitty-gritty details of car title loans, we must first understand what a title loan is. A title loan is a loan where the owner of an asset gives the title to a creditor who lends him money in exchange. The giving of the title to the creditor by the debtor-owner is to guarantee his repayment of the loan.
In the event of non-payment, incapacity to pay or any other substantial breach of contract, the collateral is forfeited in favor of the creditor to answer for the losses he would have incurred due to the debtor’s default. In the case of car title loans, the collateral the debtor needs to give is the title to his car.
With that in mind, here are some things you need to know about car title loans before deciding if it is the right loan for you.
You Need to Have a Clean Car Title
Before loaning the title of your car or vehicle, you must first have absolute ownership over the asset. According to Investopedia, an “absolute title” — also known as a “perfect title” — is one that is free of any property-related encumbrance or deficiency. An absolute title gives unequivocal right of ownership to the owner, and cannot be disputed or challenged by anyone else. This is opposed to titles with liens, attachments or judgments against them. Proof of a lien-free ownership is necessary to have the application for the loan approved by the lending company. Evidence of ownership includes registration at the Department of Motor Vehicles, Manufacturer’s Certificate of Origin or a Bill of Sale and the Registration Certificate, the best proof of ownership being the first.
You Do Not Need a Perfect Credit Rating
A good thing about car title loans is that they do not require a perfect credit rating in order to be approved. This is one of the characteristics of a car title loan that has made it so popular that in the year 2015 alone, the Pew Charitable Trusts Research estimated that there were over 2 million Americans who used automobile title loans for funding, 80% of which, according to their data, used the roll-over feature.
Car Title Loans Have a High Acceptance Rate
What is a title loan and why is it so popular? Well, here’s why: because car title loans do not require a perfect credit standing, almost all qualified vehicle owners get their loan applications approved right away. Also, the requirements needed for this kind of loan are only the very basic ones. Among those requirements are proof of personal details (like a driver’s license, military ID, passport or state-issued ID). Because of this, it has become one of the most accessible and most sought-after type of loan in the country.
Car Title Loans Are Very Convenient
The importance of having your own vehicle to use in your daily life is undeniable. People need their vehicles to get to their workplaces, schools and to many other places. Car title loans are very convenient because they have a “keep driving” feature. Simply put, you do not have to surrender your vehicle to the lending company while your car title loan is ongoing. Unlike other types of loans, the creditors in car title loans do not keep the collateral — only the title — so that the car stays in your possession and accessible to you anytime you need it. Payment of the loan is also very convenient. Almost all car title loan companies offer an online mode of payment, which is not only fast but also easily accessible.
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