Should You Take Out a Car Title Loan?

Written on February 7, 2024   By thecradletheatre   in BUSINESS

A Car Title Loan is a quick and easy way to get cash. These loans use your vehicle as collateral and typically have a short repayment term, such as 30 days. However, they also have high fees that can add up quickly. And if you can’t repay the loan on time, you may risk losing your vehicle.

A lender will evaluate your car’s value and your ability to repay the loan. You will then sign a contract and hand over the vehicle’s title to the lender as security for the loan. The maximum amount you can borrow is usually 25% to 50% of your car’s value. Some lenders also charge documentation fees, processing fees and other charges, which can significantly increase the cost of the loan.

The Smart Borrower’s Guide to Car Title Loans: Tips for Responsible Use

These loans do not require a credit check, which can be a plus for people with a spotty history of managing credit. But that doesn’t mean you should take out a title loan without researching your options first. You could find a better way to solve your financial problem, such as by using an emergency savings account or opening up a new line of credit.

In fact, a survey from the Consumer Financial Protection Bureau found that in June 2019, eight out of 10 people who took out a car title loan still owed money on it — more than borrowers who owed money on payday or pawn loans. Instead of taking out a title loan, you may want to consider alternatives such as budgeting, working with your creditors or seeking help from a credit counselor.