Are you looking for loans using your car as collateral because you need quick cash? Title loans are one option you can use to satisfy your financial needs. At Swift Title Loans, you can receive funds as soon as the same day or the next business day without worrying about your credit scores or if you don’t have a traditional job.
Knowing these ten things is important before borrowing a car title loan to ensure it’s the right fit for you.
10 Things You Must Know About Car Collateral Loans
1. You Must Own the Vehicle Outright
Car title loans typically require that you own your vehicle free of any liens. This means if you financed the car, it should be paid off in full. In some cases, a small remaining balance may be included in the new loan while still leaving funds available for your financial needs.
2. You Can Keep and Drive the Vehicle If You Make Your Payments
The best thing about auto title loans is keeping the car and using it like normal. There aren’t any restrictions on miles or where you can drive the car. You can use the car as needed as long as you make your monthly payments.
However, keep in mind that you cannot sell the vehicle while you have an outstanding balance on a title loan. You must pay the loan in full before you have the right to sell it.
3. You Risk Losing Your Vehicle If You Don’t Pay
Like other secured auto loans, your vehicle is used as collateral. If you miss too many payments, the car can be repossessed.
The number of missed payments before repossession varies, so it’s important to reach out early if you think you may have trouble making payments. If the vehicle is sold, you may still be responsible for any remaining balance not covered by the sale.
In addition, repossession can significantly impact your credit, making it harder to qualify for financing in the future.
4. Perfect Credit Isn’t Required
One of the key benefits of car title loans is that your credit score is not the main factor. A credit check may be performed, but there is no strict minimum requirement.
Instead, approval is based on your vehicle’s equity and your ability to repay the loan.
5. You Must Have Adequate Proof of Income
Approval is based on your ability to repay the loan. You must show you have a stable income that can cover your current expenses and the new loan. This does not require long-term employment, and different types of income may be accepted, including:
· Social Security income
· Disability income
· Passive income
· Part-time income
· Workmen’s comp
· Investment income
6. You May Get Funds the Same Day
Emergencies often require fast access to money. Unlike many traditional loans that can take days or weeks, title loans may provide funds the same day if you complete the process by the cutoff time.
If everything is submitted early and approved quickly, funds can be available within hours. If not, funding is typically completed by the next business day.
7. The Interest Rates and Fees Can be High
One of the most important factors to review when applying for a title loan is the interest rate and fees. These costs can be high and may exceed 100% APR, increasing the total amount you need to repay.
Make sure the loan fits your budget and consider whether the funds are necessary. Title loans are best used for short-term financial needs when other options are not available.
8. Car Collateral Loans Often Have Short Terms
Terms can vary, but some title loans may require repayment within 30 to 60 days. At Swift Title Loans, longer terms may be available to help make payments more manageable and access to funds easier. A free, no-obligation quote is available when you complete an online request, so you can review your options and choose what fits your needs.
9. Your Loan Amount Depends on the Car’s Value
The amount you can borrow with a title loan depends on your vehicle’s value and how much you can afford to repay each month. The focus is on your car’s equity, or how much it is worth.
In most cases, you can borrow about 25% to 50% of your car’s value, which is common in the title loan industry. For example, if your car is worth $5,000, you may be eligible to borrow between $1,250 and $2,500.
It’s recommended to borrow only what you need to help reduce the overall cost of the loan.
FAQ
Is it Risky to Use Your Car as Collateral?
Yes. Using your car as collateral means it can be repossessed if you miss payments, so it’s important to be sure you can repay the loan.
Do Title Loans Hurt Your Credit?
They can. On-time payments may help, but missed payments can hurt your credit.
How Hard Is It To Get a Loan Using a Car as Collateral?
Title loans are much easier to qualify for than traditional unsecured loans from a bank or credit union because they use your car as collateral and don’t focus on your credit score. However, you should only use these loans in emergencies and not just because you have equity in your car.
Final Thoughts
Applying for loans using your car as collateral can be a great way to satisfy a financial emergency after exhausting all other options. However, make sure you can’t borrow money from friends or family or use equity in your home to satisfy the financial emergency first.
If you need a title loan, be sure to read the fine print to understand the interest rates, fees, and required monthly payments so you can avoid losing your car.
