Car title loans offer some flexibility, but they do come with a few strings attached. A title loan is essentially a form of secured borrowing where borrowers are required to use their car title as security. Borrowers must first allow a bank to put a lien on their car title and then surrender the ownership of the car title, in return for a loan sum. After the borrower pays back the loan, the bank issues the original certificate of title back to the borrower. The title company keeps the certificate of title. Discover more about car title loan in this article.
Car title loans are popular among some credit unions, since these institutions are often pretty good at tracking down borrowers who have no collateral to secure short-term loans. Unfortunately, many car title loans also require borrowers to have decent credit ratings, so it's not just the credit unions that are in the lending business. Banks make up a much larger percentage of borrowers who take out car title loans.
Borrowers need cash fast, because in most states, you can only take out an auto loan if you own your vehicle. Auto dealers will sometimes loan you money on your vehicle even when you don't own it, but this is illegal. You need cash fast, so you need to go to a local bank or credit union instead. Banks usually charge very high interest rates.
The other problem with most banks and credit unions offering title loans is that borrowers aren't really allowed to use their car as collateral. They are basically taking out a short term loan against your vehicle that they can seize if you don't pay them back. Banks don't like to take these kinds of auto loans because they lose money on them every time. In addition, because you can't use your car as collateral, you're putting yourself at risk for much more serious problems if you fail to pay your short-term loans. Some people even end up in legal trouble by simply defaulting on these loans. You can learn about Car title loans in this article.
Many people end up defaulting on title loans because they fail to remember to make their monthly payments on time. The loan repayment period may be only a couple of weeks, so the borrower doesn't realize that he/she is already behind. It's possible to pay back the car loan with one payment, but if the borrower makes new monthly payments that are much bigger than the original payments, then the car could soon be worth more at auction than what is owed. If the original loan isn't paid off in full, then the auction price of the car is more than what is owed. Since a lot of car auctions are for seized cars and government vehicles, this could be a way for the bad debtor to get his/her hands on a secondhand car that they can keep as a collateral for another short term loan.
There are also some bad credit unions that also offer loans. They may accept more conservative types of collateral, such as home equity or CD's, which limits the amount of money they will lend. Still, many of these lenders have competitive rates and terms, which make borrowing from them more attractive than borrowing from other sources, such as credit unions. It's important to compare a variety of lending institutions before deciding on a lender, since many lenders are comparable in some ways. To get more enlightened on this topic, see this page: https://simple.wikipedia.org/wiki/Loan.
