Everything You Need to Know About Car Title Loans and How to Get One
Do you have a low credit score and want to end the struggle of making ends meet?
Are you tired of having to worry if you can make next month’s rent?
If you’re looking for some help and want a financial boost, enter Car Title Loans. A title loan like this can save you the struggle and worry.
What is a Car Title Loan?
Consider first what a standard bank loan is like.
The process is time-consuming and to make things worse, the qualification process is a headache and can bring a lot of anxiety.
With a title loan, it’s much simpler and easier to qualify for.
A title loan is also referred to as a car title loan or a pink slip loan. Basically, a title loan is readily available to anyone as long as he/she is the owner of the vehicle.
The way a title loan works is by determining the value of your vehicle and using this as collateral for the loan.
Now that we’ve established the basic definition of a title loan, let’s look at the differences between a car title loan and a standard loan.
Vs. Standard Bank Loan
Understanding title loans also requires learning the difference between a title and a standard loan. Here are 3 key differences between the two:
- Title loans are easier to qualify for – A standard bank loan asks for financial information, which can be a hassle and lengthy. Title loans don’t require financial information for approval and provide an easier application process.
- Title loans don’t look at your credit score – One of the biggest challenges to getting a standard bank loan approved is your credit score. If you have a bad credit score, it’s highly unlikely you’ll get approved. With title loans, you don’t have to worry about how great or poor your credit is.
- Title loans are more flexible – It’s both time-consuming and difficult to apply for standard bank loans. For title loans, it’s available to anyone who owns a vehicle, making the application process more open to approval.
What Requirements are Needed to Get a Car Title Loan?
Any loan will require a few documents and in the case of loans with title, that also means you’ll need to show some proof or at least valid identification.
These are the 5 key requirements you’ll need upon application:
- Application form
- Valid ID
- Your car title
- Vehicle registration and insurance documents
- Proof of income (can be pension statement, bank statement, paystub, etc.)
We’ll get into further detail on the process of applying and receiving your car title loan in the later sections.
Before all that, determining the value of your car is important if you want to understand how much money or the loan amount you’ll be eligible to once you’ve successfully applied for the loan.
This is one aspect that can also help you make sure that the money value your loan officer offers and what you’ve computed are the same.
How to Determine the Value of Your Car Title Loan
You’ll only need these 4 steps to determine your car’s value:
Step 1: Determine the Age, Make, Model, and Condition of Your Car
This is pretty straightforward.
The more brand new your car is the higher the value. A 2017 Toyota Camry has greater value than a 2010 Toyota Camry. BMW carries more value than a Honda. Most of all, the condition of your car whether it’s in mint condition or poor condition will affect the overall value of your car.
This is a rough estimate to give you an idea of your car’s worth. For a detailed and more accurate quote of your car’s worth, you can use Kelley Blue Book (https://www.kbb.com/whats-my-car-worth/) to get a better estimate.
The site will ask for your car’s year model, make, model, zipcode, and mileage.
For your car’s condition, if there are any damages to the exterior and interior, this will also lower your car’s value.
Step 2: Check if You Still Have Pending Car Dues/Fees
Do you still have pending dues to pay for your car?
If the trade-in value of your Toyota Camry is at $9,000 and you still owe $2,500 for it, subtract what you owe from your car’s value:
$9,000 – $2,500 = $6,500
$6,500 will be the real value of your car, seeing as how you still have pending fees to take care of.
Step 3: Ask Your Title Loan Company the Percentage of Car Value They Give
Not all title loan companies provide the same percentage. The money you receive from loans on titles can range from a percentage of 25% to 50%.
Let’s say the title loan company offers a percentage of 25%. With $6,500, you’ll receive money worth $1,625!
Some companies even guarantee you’ll receive an amount no lower than $2,500! Then again, this also depends on your car’s value.
You’ll also find a lot of loan companies in Washington D.C. In fact, title loans Washington D.C. have become quite famous. Title loans Washington D.C. have also received a good reputation in handling and processing title loans that’s simple, fast, and easy.
Rather than constantly shift from lender to lender, why not go with a company that’s already proved its service value?
Step 4: Compute Your Car Title Loan Amount
Use this formula as a guide when you apply for car title loans:
[Value of your Vehicle (Age, Make, Model, & Condition) – How much you owe] x Title Loan Company Percentage = Car Value
Bonus tip: You can improve the money value of your title loan by improving the condition of your car.
Check the interior and exterior of your vehicle for any maintenance you can do or parts you can fix, polish, and bring back its shine. Aesthetics do play a significant role in keeping your vehicle in good condition.
Applying this tip along with the 3 steps mentioned above should be able to help you get the best value of your title loan.
How to Get a Car Title Loan
With all the details covered, we can proceed to the loan process.
Step 1: Fill out the application form
Most companies will offer both online and phone applications for car title loans.
Applying online is fast and won’t take even 10 minutes to complete. As for the phone, you’ll have the advantage of asking any questions you want to clarify.
Be sure to bring all the documents needed as mentioned in the requirements section of this article. The lender or loan officer will also check your credit.
Your credit will not affect the eligibility of your loan, but it does have its perks. A higher credit will result in better interest rates. Having lower credit does not mean you have bad credit either.
Finally, most applications will come with a loan origination fee. This is usually 5% that is financed for the loan.
Step 2: Document review and determining your car’s value
Once you’ve submitted your documents, the company will review your eligibility. This is to ensure the applicant will meet the right loan terms for his/her financial situation.
After verification of your documents, the loan agent will inform you of your payment terms along with the amount of your loan.
Step 3: Proceed to Claim your Loan
After you’ve agreed to the loan terms, a loan contract will be drawn for you to sign. You’ll be able to receive your loan on title or after 1 business day.
Car title loans are also incurred as short-term loans. After you pay your loan, your car’s title will be cleared of any lien.
You’ll have various payment options to choose from such as:
- Money transfer
- Bank deposit
- Receive a Check in Your E-mail
- Loan payment stores
Risks In Getting A Title Loan
In any decision, there are always pros and cons. In this case, it’s essential to consider the risks behind it.
Risk #1: Title Loans have high fees and interest rates
Yes, the loan process is simple, fast, and easy. You also don’t have to worry much about credit. In addition, the money you receive can surely save you from a lot of struggle.
And yet, there’s still a catch: a high-interest rate.
A common interest rate most lenders charge is 25% of the amount you were given.
For example, if the total amount you received from your loan was $2,000 and your lender charged you 25%, then 25% x $2,000 = $500.
As a result, the total amount you’ll have to pay to settle your loan would be $2,500.
Although the money you received from your title loan was high, it’s also a risk you’re taking whether or not you can deliver the money owed at the end of the month.
Since title loans are also short-term loans, you’re looking at a 30-day loan term for your vehicle.
Be sure to ask your loan agent for the APR amount and total cost. Don’t be afraid to ask from different lenders or loan agents as well to find the best offer for you.
Risk #2: If you’re unable to pay for your loan, you could lose your car
If you’re unable to repay the amount, the lender might offer to “extend” or roll over your loan.
For example, you have a $100 loan with a $25 fee. After 30 days, if you can’t pay the amount, you’ll have to pay the $25 fee and your $100 loan will carry a new 30-day term together with the 25% fee.
Once you pay your new loan at the end of the 30-day term, you’ll already have paid $25 last month plus the $100 loan and 25% fee for the current month. This brings you a total of $150.
This way, you’d be incurring more costs the more you roll over your loan and eventually, you’d lose your car.
The Bottom Line
Getting a loan can surely save you a lot of trouble, especially if you’re in dire need of it; however, getting one should be a calculated risk.
If you get a loan and are expecting to receive cash/money at the end of the month, this will take some of the load off your loan. If; however, you feel you’ll end up taking on more loans, look for less-costly alternatives.
This includes credit card cash advances or you can apply for a personal loan with a co-signer.
Before you jump into a financial opportunity like this, be sure to gather both the benefits and risks to it. For now, focus on saving more and build good credit while you’re at it.