Auto title loans are called as such because you are pledging your automobile title or your ownership to your automobile in place for an amount of money. In case you do not pay according to the terms that you and the lender agreed upon, you have to give up your vehicle. In short, you are setting your automobile up as collateral for a loan. This is the basics of how auto title loans work.
However, there are still more to know about how auto title loans work before you decide to get this type of loan. Auto title loans amount to half the resale value of a vehicle. Some lenders offer as low as 20% of the resale price so it might be good to look into it before getting this loan. This is a good deal for the loan provider as they are sure to have their money back. That is why this is not a difficult loan to get as long as you have a vehicle that is clear of any obligations and that you can provide necessary documents such as the title of the car.
The auto title loans are considered a short-term loan that is repayable within 15 or 30 days — depending on what has been agreed on the loan contract. The interest rates range from 30% to 350%. If you were not able to pay as agreed upon, the lender will have the right to take your vehicle and sell it. The lender will get the amount you owe from them from the earnings of selling the vehicle.
Renewing auto title loans can be done. This is a preferred action that most people take if they are not able to pay on the specified date as a way of extending the loan repayment. However, there is limited number of times you can extend auto title loans.
Getting auto title loans is a good choice if you need emergency cash and must be paid as soon as possible. This is because there are major drawbacks in getting this type of loan. Auto title loans can be very expensive. You often pay more than 100% of the amount you have received from the loan. This is so much like payday loans, fast cash but expensive when it is time to pay it back. And because you have set your vehicle as collateral, there is a great risk of losing it. If you are using your car as a means of living or if you are too dependent on your car in terms of financial needs, you might find yourself in a dire position if you lose it.
Getting auto title loans entails high financial risks. This is why it is not advisable to get one unless needed. And it is always best to find alternative loans to get the cash. Sometimes, it is best to just sell the automobile seeing how auto title loans work in your financial situation. But if you need the cash and you have an extra car you can afford to lose and you have not time to search for a buyer for it, then auto title loan is an ideal and convenient loan to get.