When Title Loans May Be A Good Option

It’s near the end of the month and everything’s moving along smoothly. You’re paying your bills on time and even have a little leftover—but just when you start thinking you’re firmly on your financial feet, the unexpected happens. 

Whether it’s medical, repair, or another unexpected expense, you’re struggling to make ends meet. You can always hold a yard sale or borrow money from family or friends, but these aren’t always great options. Another possible solution is looking into title loans. Not sure what a title loan is or if it’s a good solution? Here’s what you need to know to get going.

What is a Title Loan

A title loan is pretty much what the name implies. You can use your vehicle title to get a cash loan, typically within a few minutes. Don’t worry; you’re not giving up your vehicle until the loan is repaid. 

You keep your car, truck, or motorcycle and the loan office hangs onto your title. If you can’t repay the loan within the agreed-upon timeframe, the title loan company can repossess your vehicle. Like most loans, you need to put up collateral and in this case, it’s your vehicle. Once the loan is repaid, you get your vehicle title back.

Benefits of a Title Loan

Being able to get a loan fast is an advantage, especially if an emergency expense suddenly pops up. While this is often enough to make you consider this loan option, there are a few other benefits to consider.

Quick Access to Cash

Whether you need cash to pay an emergency plumber or repair a busted radiator, you don’t have time to wait. Even if you have excellent credit, going through a traditional lender takes time. Even if you apply for a loan online, you’re probably still waiting a day or so to find out if your application is approved.

While you’re waiting, your issues are probably getting worse. For example, if you need cash to hire an emergency plumber your leak may be turning into a gushing river. Now, you’re dealing with water damage on top of the original problem.

A title loan company only needs a few minutes to either approve or deny your loan application. This means, within minutes of walking in the door you may be leaving with the cash you need. All you need to bring is your vehicle title and driver’s license, it’s one of the easiest ways to secure a small cash loan.

Credit Scores Aren’t Important

If you have excellent credit, congratulations! However, if you’re part of the estimated 30% of Americans with poor credit scores, getting loan approval is rarely easy and may even be impossible. This is when a title loan comes in handy. The loan company doesn’t care about your credit score. The information is requested on the loan application and no one’s going to run a check on your credit history.

This means that if you have poor, bad, or even no credit history, you can still get approved for a title loan. As long as the vehicle title is in your name, and you have possession of the automobile, you’re more than likely to get approved for the loan.

Flexible Repayment Options

Paying off a title loan is the same as any other type of loan. You have a payment schedule that you must meet. However, while traditional lenders like banks rarely offer flexible payment schedules, it’s a little different with a title loan company.

While you can’t create a personalized repayment schedule, you can select from a few options. Some title loan places allow you to make weekly, bi-weekly, and occasionally even monthly payments. You can choose the payment plan that works best for your finances. This can take some of the stress off when it’s time to start repaying the cash loan.

Something to think about as you’re choosing a repayment plan is that interest is always included. If you go with a longer payment plan, for example, stretching the loan out to a year instead of a few months, you’re going to be paying a lot in interest. You may even end up paying double or more than your original borrowing amount. In the long run, it’s more cost-effective to repay the loan as soon as possible.

You Can Keep Your Vehicle

As mentioned earlier, you get to keep your vehicle after taking out a loan. Your vehicle is being used as loan collateral, but this doesn’t mean leaving it in the loan company’s parking lot.

You will temporarily surrender the vehicle’s title to the loan company. They need the title to repossess the vehicle if you fail to repay the loan. Once you make the last loan payment, you get the vehicle title back, typically on the same day.

Potential Downsides to Title Loans

There’s a lot to like about title loans, especially how quickly you can get emergency cash. However, there are also a few potential downsides you should know. A primary concern is the high interest rate since you’re paying for the speed and convenience of the loan.

Some states have laws limiting how much title loan companies can charge in interest, but not all. On average, you should expect interest rates around 25%, which translates to a 300% APR. Yes, this can leave you gasping for breath. 

Your interest payments may total more than your original loan. However, remember the title loan company isn’t performing a credit check or requesting collateral beyond your vehicle title. The high interest rates help protect the loan company’s bottom line.

Another disadvantage is the possibility of losing your vehicle. Even one missed loan payment can trigger an automatic repossession. If another emergency pops up, you may be stuck between paying off the title loan or dealing with the new issue. This can leave you in a bit of a financial bind.

Title Loans Can Help You Handle Emergencies

While emergencies do arise unexpectedly, necessitating immediate financial resources, it’s crucial to consider all options thoughtfully. A title loan might provide a quick influx of cash, but it’s imperative to fully understand the terms and implications. 

Thorough research and a clear understanding of the high interest rates associated with title loans are essential. If you’re confident in your ability to manage the repayments without compromising your financial stability, then, and only then, might a title loan be a suitable emergency solution.