A title loan is a type of collateral lending in which the subject of collateral is a vehicle. At the same time, the car remains at the full disposal of the owner, and only the title is transferred to the lender. This is the best option for those who earn money by means of a vehicle, for example, taxi, delivery, cargo transportation, etc., or are simply afraid to leave the car in specialized parking lots of credit institutions.
Banks, payday lenders and pawn shops issue title loans. Banks usually accept mainly only private cars, but in payday lending companies and pawnshops, it is possible to pawn cargo transport, special equipment, moto and water transport.
Naturally, each of the listed organizations has its own requirements for both the collateral and the borrower. Banks are more demanding for borrowers themselves, check their credit history and solvency.
To issue a loan secured by a vehicle title, the borrower must meet the following requirements:
- Be the owner of the car. A citizen who owns a car by proxy cannot issue a loan secured by this car.
- The presence of permanent or temporary registration on the territory of the United States in the state where the lender is located. The borrower must have US citizenship.
Some financial institutions impose a number of additional requirements on customers:
- a certificate and income. The provision of documents confirming the solvency of the borrower allows you to issue a loan on more favorable terms with an increased limit.
- the presence of a second document confirming the identity of the applicant. This can be, for example, a driver’s license or SSN.
- involvement of one or more guarantors. In this way, you can significantly increase the chances of application approval. This is especially true for citizens who have not reached the age of 21 or have a short work experience.
How is the application process conducted?
It is quite simple to issue a title loan. The whole process follows the following pattern:
- You come to the office of a financial institution, contact its representatives by phone or submit an online application through the official website.
- A preliminary assessment of the vehicle is carried out and the proposal is approved.
- If you are satisfied with the loan’s terms, then you come to the office for technical inspection, assessment of the exact cost of the car and legal conclusion of the transaction.
- After all the formalities are seе, you receive money in any convenient way: in cash at the cash desk, as well as by instant transfer to a bank account or card.
The contract outlines all the terms of the loan, so from the legal side you are fully protected. After paying off all the debt, the title will be returned. If you do not want to drive your car without a vehicle title, you can leave it as a deposit. In this case, the amount of the cash advance will be larger. At the same time, the car is placed in a guarded parking lot, so nothing will happen to it. Some pawn shops even provide the opportunity to personally observe the car in real time through a video surveillance system.
Important nuances of the loan agreement
Almost every financial institution describes the proposed terms as the most profitable on the market. On the web resources of these companies you will see a lot of tempting ads and promises, but how not to fall for the bait of unscrupulous creditors or just scammers? The answer is simple – carefully and thoughtfully read the documents that you are given to sign. In this case, we are talking about a loan agreement – it contains all reliable information about the actual terms of the loan. The decision to borrow money against the security of a vehicle’s tutle in a selected specific company should be based on the provisions of the contract and the norms of current legislation.
The standard agreement secured by the title contains the following data:
- information about the lender;
- rights, obligations, responsibilities of the parties;
- subject of the contract;
- the procedure for making payments and accrual of interest;
- the procedure for resolving disputes that have arisen.
Items related to the rights, duties and responsibilities of the parties should be read with special care, since it is here that various “pitfalls” are most often contained, fines and penalties are prescribed for delays, etc.
In addition to the contract, it is also worth getting acquainted with the internal documents of the lender, which describe the requirements for the borrower, the requirements for the car, the application procedure and loan processing, methods of making payments.
How to get deposited?
The transfer can take place in any of the ways, by agreement of the parties:
- by transfer to a bank account;
- in cash;
- in cash from a private person;
- transfer to an electronic wallet (rarely used, but this option is possible);
- money transfer;
- through a safe deposit box.
What are the benefits of title loans?
Among the main advantages of title loans are the following:
- Minimum number of documents. To apply for a loan, you need to have only an IS, a driver’s license, a title and a certificate of registration. You will not need to present any certificates from your place of work.
- Quick application. In banks, review of an application for a loan can take several days, while you can get a cash payment secured by a title in an online direct lender in just a few minutes.
- Flexible credit terms. Such services practice an individual approach to each client, so you can choose the optimal conditions for a cash loan.
- No hidden fees. Unlike banks, online lenders do not include additional payments in the loan agreement, the amount of which often exceeds the interest on the loan. Therefore, your overpayment will be exactly as much as will be indicated in the documents and not a penny more.
Thus, it is much more profitable to get money secured by title than classic bank loans. That is why many Americans prefer to issue them.
What disadvantages can this type of loans have?
If you apply to a legal service, then, perhaps, the main disadvantage of a title loan in relation to a loan secured by the car itself can only be called a smaller amount: 70% of the estimated value versus 90-95%.
What risks can there be? It often happens that a person is in a hurry to get money to solve their problems and simply drops guard. Since this service is very popular, the main danger is associated with the risk of facing scammers. Therefore, when choosing a service, always observe the following safety rules:
- make sure of the reliability of the organization: read reviews, view ratings and black lists of lenders in your state;
- carefully study each clause of the contract before you sign the document, especially those that are written in small print;
- be sure to keep all documents confirming the fact of the transaction until you fully repay the debt and return the title to yourself;
- always make payments on time, and in case of difficulties, immediately warn the lender and ask to prolong the contract. This will help you avoid a lot of problems and save the car.