What You Need to Know About Car Title Loans

A car title loan is an option for consumer who may have difficulty getting a bank loan or a credit card due to having poor credit or no previous credit history. It is similar to a payday loan in that it is a very fast process and usually carries a higher rate of interest than the traditional types of loan.

To qualify for a car title loan, the applicant must own his or her car free and clear. This means that no car payments are being made on it and that no other party has a financial interest in the vehicle if it is sold. The loan applicant must actually produce the car title when applying for this type of loan.

Loan Terms on a Car Title Loan

A car title loan is intended to be very short-term to provide the consumer with cash to manage an emergency financial situation. The amount of money he or she can borrow is limited to the value of the car according to the Kelly Blue Book. The borrower does not have to submit to a credit check in order to qualify. If the loan is not repaid in the specified period of time, the lender has the option of respossessing the car and selling it to recoup money on the defaulted loan.

Interest Rates and Other Fees

When figured out to an annual percentage rate, the interest rate charged on a car title loan can come close to 300 percent. There may also be other fees involved such as an application fee, lien fees and more. Consumers should understand the amount they are actually paying for the loan and repay it according to terms in order to avoid taking on debt that may be difficult for them to manage. If a consumer find that he or she is unable to repay the loan as agreed, there be may an option for an extension. However, this comes at a very high interest rate and should only be considered in emergency situations.