What Is a Title Loan?
Title loans are popular for two key reasons. First, an applicant’s credit rating is not taken into consideration when determining qualifications for the loan. And second, thanks to looser application requirements, a title loan can be approved very quickly for amounts as low as $100.
- A loan that requires an asset as collateral is known as a title loan.
- Title loans are popular because they do not take into consideration an applicant’s credit rating and because they can be approved very quickly.
- The most common type of title loan is a car title loan, where the car itself is the asset put up as collateral.
- Title loans are usually taken on by individuals needing cash fast or those in financial difficulties.
- The costs of title loans are exorbitant and they are considered a bad financing option.
How a Title Loan Works
The most common payday loans Creston Ohio form of a title loan is a car title loan. In this case, a potential borrower is required to own a car outright and sign the title over to an auto loan title company. The loan company will lend up to 25% of the car’s total value to the borrower and keep the car’s title as collateral in case of default.
Typical car title loan amounts are $1,000, although they can be higher. The usual length of the loan is 15 to 30 days but can be longer. Borrowers can repay the car title loan with a single payment, typically after one month, or repay the loan on a multi-year installment plan. If a borrower does not repay the title loan in accordance with the repayment agreement, the car can be repossessed immediately by the auto loan title company. The loan company also has the option of letting a borrower in default make interest-only payments for one-month periods, effectively rolling over the loan amount indefinitely until it’s repaid.
Title loans may sound attractive to individuals with bad credit or people in financial difficulty who need cash fast. …