Title loans are loans that are guaranteed with an asset. Assets that act as a collateral are most notably cars, thus the most common type of quick title loans are the car title loans. There are two main advantages of title loans – they do not take the credit score of the potential borrower into consideration and they have a simplified application procedure, which makes them quite fast to obtain. For example, a small loan of $100 may be taken out in a matter of hours.
The car title loan is the most common type of title loans. Applicants should be car owners so that they can sign the car title to a car loan title lender. The amount of the loan would be as much as 25% of the car’s value. The lender would also keep the car as collateral. In other words, if the borrower cannot repay the loan, he will lose his car.
Usually, quick car title loans are taken out for no more than $1000, but there could also be higher amounts. There are different options for borrowers who can either repay the loan amount in full after a month, or pay it in equal installments for the next two years. If neither of that is done, the lender has the right to repossess the automobile and sell it. The lender can also let a borrower in default make payments only for the amount of the interest on a monthly basis and roll over the loan amount indefinitely.
Although title loans are available to people with bad credit history, they may be too costly. Among the most expensive loans are car title loans. The annual percentage rate on car title loans could be as high as 300%, thus making it impossible for the borrower to actually repay the loan’s principal.
In order to choose among different options, potential quick title loan borrowers should compare the costs. They include APR, fees, repayment period and the cost in case of a default.
Additional Consumer Protection for Military Service Men
For the members of the armed forces, there is additional legal protection in accordance with federal law. These provisions concern the maximum APR that includes most fees – it should be no more than 36% and some additional disclosures about their rights and options. Any loan contract that violates the law is void. Also, all customers must be specifically asked whether or not they are members of the armed forces.
Even so, these loans are usually expensive, therefore, military members are advised to reconsider their options. There are several aid organizations that are in service of the military. The military service men can also look to banks, credit unions and their friends and family for urgent financial assistance.
Different options for taking out a title loan exist. The applicant may visit a lender’s office or apply for the loans online. There are many websites offering title loans online only. They have fast and easy application procedures. Of course, the applicant would be required to have some documentation and that include ID, car title and the duly filled out application form. Sometimes, title loan companies require a duplicate of the car keys.
From the moment the loan is approved, the car title stays with the lender and the cash amount is given to the borrower. The loan term is typically one month. When the time is due, the borrower should repay both the amount and the fees. There may be some additional charges too.
The cost of the loan depends on its monthly fees. Fees may be as much as a quarter of the full loan amount. Thus, the APR may reach 300% or more.
What is APR and How is it Calculated?
APR means the annual percentage rate of the loan. Basically, this is the cost of the loan for a year. It includes the amount of the loan, fees and interest rates for the period of the loan.
Options for repayment include repaying personally, through an online platform or by using an automated payment system. If you choose the last option, you should authorize the lender of the title loan to withdraw the agreed amount from your bank account on a monthly basis or once in full. The lender can only use this option if the borrower has specifically authorized him. Pre-authorizing is illegal.
Consequences in Case of Not Repaying on Time
In case that the borrower is unable to repay on time, the lender is given several legal options. He may choose between a repossession of the car or other collateral or let the borrower roll over the loan. This means that the borrower borrows the same loan once more for an additional month or another time period. Rollovers aren’t free; they come with an additional monthly fee and may turn out to be too expensive and unmanageable in time. Rollovers add fees and charges to the already unpaid debt and they come with a new interest rate.
Also, there is the constant danger of being trapped in a cycle of constantly re-rolling the existing debt. This may eventually lead to the losing your car.
What if There is No Repayment at All
If it turns out that the borrower is completely unable to repay the amount he has taken out, the lender is allowed to start the procedure of repossessing theautomobile. The procedure ends with selling of the car. The lender may keep the price, but in some states he is obliged to pay back the former car owner the amount that exceeds the debt.
After all, cars are a preferable means of transportation and losing yours would cause serious inconvenience. The lender may also require the installation of a GPS so that he can track the car at all times. Another common requirement is the installation of a starter interrupt device so that the owner won’t be able to use the car in case of a repossession procedure.