Car title loans are an easier option than some of the other secured loans you may consider. Personal loans have more stringent criteria, especially for those who do not have an amazing credit score. Unsecured loans are not too difficult to obtain, particularly payday loans and other short term unsecured loans for bad credit, but they would almost always have higher rates of interest than car title loans. If you own a car and you have a title free of lien then you can opt for these loans. Here is a comprehensive guide shedding light on various facts about car title loans you should know.
- First, the law regulating car title loans vary from state to state. Most states have a detailed law that regulates every aspect of car title loans, such as the amount you are eligible for, how a car is valued or evaluated, the maximum rate of interest or the minimum loan amount, the term of repayment and the grounds on which your vehicle can be seized and possessed to recoup the lent amount along with the accrued interest. You should find out the specifics of the law in your state before you apply for car title loans. Lenders can be held liable if they do not adhere to the law. Some states are more stringent with their laws that others. For instance, some states do not cap the rate of interest you can be charged. You are likely to pay more interest in such states. Then there are some states that have capped the maximum amount you can borrow on the basis of the value of your car or vehicle. Lenders cannot offer you more money than this cap.
- You should know that car title loans are readily available only when there is no lien. A lien is applicable when your car or vehicle is financed, and you have not repaid the entire loan. Your title would be treated as a lien till such time you are done with the loan and only then would it be deemed free to be used for such loans. A lien may also apply to cars that have been used as collateral for secured loans. Car title loan itself is a good example. When you use your vehicle or its title as the security for such loans, you are basically converting the title to a lien. Your car is hypothecated. There are states where you cannot apply for car title loans unless you have repaid the loan. Some states allow title loan on a financed car. Even if you have a lien, some lenders will be more forthcoming and especially if you have only a few repayments or installments left. The value of the car, the pending amount of the car loan and the interest accrued among other factors will come into play in such cases. You can get a title loan on a financed car in some scenarios.
- You should know the loan amount you are eligible for, the maximum rate of interest you can be charged, the minimum repayment term you must get and the provisions for renewals of such terms. Most states require lenders to renew the repayment term, say from a hundred and twenty days up to a hundred eighty days. This is to help borrowers pay back the loan without having to give up possession of their vehicle. The seizure and seeking possession of your vehicle is also well regulated. Some states are more lenient in this regard and may not require the lender to send you any notice. Some states are more stringent and specifically state that the lender must issue a notice.
- You should be told how and when the lender is going to auction your car, so you can make an effort to save it by repaying the loan or by getting into some arrangement with the lender. All such correspondences should be documented to stand legal scrutiny. You must also note that some states provide relief to borrowers after their car or vehicle is seized, possessed and sold off by the lender to recoup the lent amount and interest. Some states require borrowers to pay the difference if the auction does not yield a return sufficient to recoup the unpaid loan amount and interest.