Title loan companies have gotten a bit of bad rap in the recent past. While they can charge high interest rates, they also provide quick cash for many individuals with bad credit who have difficulty otherwise obtaining a cash loan in a time of crisis. This article details how a loan from a title loan company works and whether they might be a good idea for you in a time of emergency.
At its simplest a car title loan is a cash loan secured by a piece of property, your car, truck or other vehicle. The way it works is that you bring your car title and your car to the title loan company. They will appraise your vehicle and tell you the maximum amount of loan that are willing to extend. Most loan companies will not loan more than 50% of the appraised value of your vehicle. For instance, if you bring a car to a title loan operation and they value the car at $5000, you will probably not be able to obtain a loan for more than $2000.
Now, in order for a loan to be processed you must own your car clear. If you are making payments or if the car's title is not in your name, you will not be granted a loan. If you co-own the car with a spouse or family member, you must both be present to sign the loan paperwork.
The issue with car loans is their terms. In most cases, even though your loan is secured, you end up paying more than 300% in annual interest rates. Now, if you are able to pay off your loan in full at the end of the 30 day period, you will pay much less. But, even in that instance, you will still pay at least 20% for the loan, which is considerable interest on a loan of only 30 days.
However, if you do not have great credit or access to other sources for quick cash, title loan companies provide a critical service in times of emergency. In a true emergency, most people are willing to pay 20% to get out from a jam. But, these loans are not for everyone, so it is critical that you educate yourself about the associated fees before you sign any papers.
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