Do you need cash to begin your business dream? Perhaps you have been hit with an expensive medical bill? Whatever the situation, there are many different financing methods available when money is needed.
In fact, there are so many options that it can get confusing. Even when you start to get a grasp of the choices, it’s difficult to pinpoint the best source of funding to match your requirements.
Well, one pick is a title loan.
What is a title loan exactly? What advantages does it possess? Why should it be chosen ahead of other financing methods? The following guide will help to provide the answers:
Defining a Title Loan
As the name suggests, a title loan is a type of loan. However, it differs from other options due to the fact that the loan is offered in exchange for an asset as collateral. That asset is typically a vehicle, which is why a car title loan is the most common loan of this type.
In general, the person seeking the loan will own the asset outright. The title for this asset is then signed over to the loan company, who will keep it as collateral until the loan is paid off in full.
Typically, the value of the loan will be up to 25% of the asset’s total value. In the case of a car, the total value will be based on its make, model, year, and miles on the clock.
What If You Can’t Keep up With Payments?
Payment plans will be dependent on the chosen lender. Nevertheless, they can range from a one-off payment after a single month, to those that are spread across a number of years. As with any type of loan, it’s important you budget accordingly so you can keep up with the agreed repayment plan.
If you’re wondering what happens if you don’t pay a title loan back, it’s not exactly good news. Even if you only miss one payment, the lender might immediately repossess the asset you used as collateral.
The Advantages of a Title Loan
A title loan has a number of advantages that make it an attractive proposition. If you’re contemplating this type of financing option, take into account the following points:
- Fast approval: If you’re in urgent need of cash, a title loan is a suitable option. Once approved, most lenders will supply the funds within 24 hours.
- Easy processing: The application process doesn’t involve any procedural requirements that take an age to complete. If you’re getting a car title loan, all you need are a few basic documents and your car ownership details.
- No need for a strong credit rating: One of the great benefits of a title loan is that a credit rating doesn’t come into play. You can still receive the cash even if you have no credit score whatsoever.
- You keep your vehicle: When you opt for a car title loan, your vehicle isn’t withheld or confiscated by the lender. You are still free to operate the car as normal.
Have you ever taken out a title loan? If so, was it worth it? Let us know in the comments below!