Borrowing money can represent a challenge, especially if the applicant has bad credit. An automobile title loan involves using the equity in a car to get fast emergency cash. It is an any any-purpose loan that is suitable for a poor credit history due to there being no credit checks at any stage. Conventional lenders perform credit scoring in order to determine the risk of the borrower defaulting. However, the provision of collateral (the car) means that this isn’t necessary for a vehicle title loan.
Getting Approval for an Automobile Title Loan
- Most lenders require applicants to be 18, possibly 21.
- Some vehicle title loans will only be available to those who are in full-time employment. However, others will simply seek proof that the customer is in a position to repay the debt.
- Whilst clearing vehicle finance is normally a basic requirement, an auto pawn loan may still be available if there is less than 25% left to pay.
- Proof of vehicle ownership will also be required.
How to Get an Auto Pawn Loan
- The value of the car will be assessed using an internal process or the Kelly blue book. Although most customers want their fast emergency cash as quickly as possible, it is advisable to check with several providers as valuations and the terms of lending are likely to vary considerably.
- After the valuation, it will normally be possible to get a vehicle title loan for 25% to 50% of the available equity. The figure is capped as lenders want to make sure that there is sufficient equity to cover any interest and charges in the event of default. There is also scope for the customer to renew the borrowing agreement in the event of financial difficulties.
- Most automobile title loans tend to be for over $2,500. This is because customers can get a pawnbroker or payday cash loan for up to $1,000.
- Any paperwork will need to be signed. The customer will also hand over a duplicate set of car keys and the car title. A quick cash advance will normally be provided within the next 24 hours.
Cost of a Vehicle Title Loan
- The APR for an auto pawn loan can be as high as 300%. This makes repaying the debt difficult and regularly leads to its continued renewal. A Missouri auditor found that there were 3.5 times more renewals than new loan agreements.
- The usury rate of interest means that the borrowing term is normally 30 to 45 days. Depending on the worth of the car, APR and how much is borrowed, the term can be extended.
- Almost half of U.S. states have prohibited automobile title loans and others have placed limits on the maximum rate of APR to protect consumers from unfair lending practices. For example, the maximum annual APR in Iowa is 35%.
Defaulting on an Auto Title Loan for Fast Unsecured Cash
An auto vehicle title loan is a secured debt. Failure to repay the principal and interest punctually will normally lead to the repossession and sale of the vehicle. Any profit arising from the sale will be kept by the lender. Financial difficulties are the leading reason why so many auto pawn loans are renewed.