How Title Loans Work
Is a Title Loan Appropriate for You?
A title loan is a short term loan given against the title of an automobile. You may be able to get a title loan on other vehicles or assets, but cars are the most common since they can be easily valued and sold if the loan is not paid. A good example of a site that offers these types of loans is title loans Orlando.
What You need to get a title loan
The only thing you really need to get a title loan is free and clear title to your car. That means you have to own your car outright and cannot have a lien against it from another lender. Also, the car has to be somewhat valueable. I would guess it would need to be worth at least a few thousand dollars so that there is enough equity in the car to cover your loan.
More importantly, if you want to keep your car, you need to make sure you have a way to pay back the loan when it is due. Make sure you have a concrete plan in place to pay back your title loan when it is due or you will probably lose your car.
What to expect from the title loan
The title loan will have high rates and a short payback period. Title loans often have interest rates in the double digits and some can even have annual (APR) rates over 100%. Make sure you read the fine print before proceeding. Also, the payback period on title loans is pretty short - often only 30 days. A title loan is not a long term loan but really just a way to borrow money for a short period.
What to watch out for when getting a title loan
You should know exactly what type of loan you are getting and what the consequences of not paying back the loan are. Because you are pledging the title to your car, if you do not pay back the loan when it is due you will have to pay penalties and could very well lose your car. If your car is taken by the title loan company, they will likely sell the car, pay themselves their fee, and then return the remaining money to you.
In the end, a car title loan can be a useful tool to help you manage your finances, especially if you have cash flow timing issues that can't be helped. However, always know what you are getting into and explore any other alternatives for borrowing money.
