Not including home mortgages, the average American carries $38,000 in personal debt.
In the context of a global pandemic, paying off those debts has become increasingly difficult. But you may have a pile of cash in a place you never expected. That is, in the form of your car.
Car title loans can help you transform your car into cash, without ever losing the ability to use it as you normally do. Before signing on the dotted line, there are a few key things you need to know about how car title loans work.
We’ll tell you the most important things you need to know about car title loans and their benefits below.
What Are Car Title Loans?
Title loans are loans that require you to put up one of your assets as collateral. It follows that a car title loan is a loan that requires you to use your car as collateral. These types of loans are also available for trucks, motorcycles, boats, and other recreational vehicles.
Qualifying for a car title loan means that you own your car. There can’t be any liens on your vehicle or you must have at least some equity. If you’re approved, you’ll exchange the title of your vehicle for the loan amount.
Most lenders will also require a photo ID and proof of insurance. Some lenders may also ask for a second set of keys along with the title.
Benefits of Car Title Loans
If you’re ever in a situation where you require money quickly, a title loan allows you to borrow money against your vehicle. They can also be used to pay off pressing debts and lower your overall debt. To learn more about that, read this post.
You would choose a car title loan over other types of loans in these situations because they’re among the fastest ways to access a loan. With online applications processed in less than half an hour, they’re also simple.
Plus, they don’t take into consideration your credit rating, for those with bad or no credit. You get to keep your vehicle and use it as you normally would, all while covering a debt that could have otherwise been very difficult or impossible to pay.
How to Pay Back Car Title Loans
Car title loans may be single-payment loans or installment loans. Both types of payment plans have similar APRs.
Single payment loans require the borrower to pay the full amount of the loan plus interest, usually within 30 days. Installment loans are paid in installments, usually spanning 3 to 6 months.
More Debt-Related Advice
Car title loans are a quick and easy way to pay off pressing debts and address other financial emergencies. You’ll need to prove ownership of your vehicle and have a plan in place to pay it off within the terms of your loan.
And when you find yourself in a bad financial place, you can’t read enough advice. Be sure to check out our debt section regularly for the best advice you can find.