Loan contracts are the agreements which come in different forms. It can be a verbal or a legal agreement. People get loans for different purposes. If you need a loan to fulfill some need, you should be familiar with the whole process. Before getting a loan, the first thing to consider is the reason and the time duration in which you need the money. A borrower can have many options to get a loan. These options include close-ended, open-ended, unsecured and secured loan.
Open-ended loans are the one in which you can borrow the money again and again for example credit cards. Close-ended loans are the ones which a person gets only one time. Unsecured loans are the one in which you don’t need to give anything as a guarantee but it has a higher rate of interest. Secured loans, on the other hand, are the ones in which you need to give your asset to the other party and you can get the money in return. Car title loans are an example of secured loans. Before getting into the details about how a car title loan works, you should know what a car title loan is.
Car title loan:
A car title loan is a loan which a borrower can get against his car’s title. It is a short-term loan. The borrower needs to pay back the loan in a specific time which is mostly 15-30 days. If you urgently need some money and you have a bad credit score, then a car title loan is the best option you can get. You can get your desired amount with no credit check. The amount of the car title loan depends on the value of your vehicle. Title loans are no doubt the fastest way to get the cash.
To get a car title loan, there are some requirements which need to be fulfilled. These requirements include the age of the borrower needs to be at least 18. The borrower should own the car against which he is applying for the loan, a government ID and the assurance of your income which will show that you are able to pay back the loan. If you fulfill all the requirements then you can get a car title loan from your nearest store or online. Now, you need to know how car title loans work.
How does a car title loan work?
The answer to the above question is simple. You just need to follow some steps and you will get your car title loan. Consider an example, if you were to take some of your valuable items to a pawn shop, the owner of the shop will examine your item and will lend you money depending on the current market price of the item. You will then pay the interest on that loan until you are able to pay the whole amount. After that, you will get your item back.
Same is the case with a car title loan. You will contact a company or a person who will lend you money based on the market value of your car. The lending company will get your car’s title until you pay back the loan. You have to submit some legal documents in order to get the deal done. These documents will include your ID card, papers of the car etc. in return, the lender will make you sign a legal contract in which the terms and conditions of the deal will be mentioned.
Check for the options the lender has added into the contract. Check for the alternatives if you will be unable to pay the loan within the specific time. Also, check for the interest rate the lending company is offering. If all of these clauses are acceptable for you then go for the title loan. But keep in mind that it is a short term loan with a high rate of interest. You need to pay it back on time to avoid any penalty fees.
Repaying the title loan:
Getting a car title loan is a simple process but paying it back can be tricky sometimes. You can repay your loan in cash at once or in intervals. If you are unable to pay back the loan in time, some loan companies offer different options. You can refinance your title loan which means that you will engage yourself into a new loan system. This allows you to adjust your payments and maybe even lower them.
Keep it in mind that the car title loans can be risky if you stop making payments. You can lose your car if you default on the loan. The amount that you end up owing on your loan could end up being less than the actual market value of your vehicle. If you miss a payment or know you are going to, you should contact the company as soon as possible to see what options you have.
This was all you needed to know about title loans. A car title loan can be your best option when you need money for an unexpected expense. It will allow you to have your desired amount in a very short time and then you can pay it back easily. But your immediate needs will be fulfilled. This instant solution to your cash problem can provide you with a relief from financial stress.