Car Title Loans: What You Need To Know
Car title loans are a type of cash advance that allows a borrower to borrow money using their vehicle as collateral in exchange for credit. While car title loans are not available in Canada, other options are available for borrowers who need cash quickly.
Here, we’ll discuss the pros and cons of car title loans, eligibility requirements, documents required, and other important information you need to know before taking out a loan.
What Are Car Title Loans?
Car title loans are a type of short-term offer where borrowers borrow money with their car as collateral from online lenders. The online lenders hold the vehicle title as security for the money lent, and the borrower receives cash in exchange.
The personal loan amount is based on the vehicle’s value, and the borrower must repay it with interest within a specified timeframe.
If the borrower cannot repay the personal loan, the lender has the right to repossess the vehicle. Car title loans can be a quick way to get cash, but they come with high-interest rates and can be risky if the borrower needs to repay the cash advance. It’s essential to carefully consider the terms and conditions of a car title loan before entering into one.
How Do Car Title Loans Work?
Unlike a personal one, a car title loan works by using a borrower’s vehicle as collateral instead of credit scores. The lender holds the car title as security for the credit, and the borrower receives a cash advance in exchange. The personal loan amount is based on the value of the vehicle.
The borrower is required to repay the auto loan, with interest, within a specified timeframe. If the borrower cannot repay the personal loan, the lender is entitled to repossess the car. The interest rates on car title loans are often high, so it’s crucial to ensure that you can repay the personal loan before borrowing.
Car Title Loan Eligibility Requirements
To be eligible for an auto loan, you typically need to meet the following requirements:
- Own a vehicle: You must own a car, have a clear title, and have proof of insurance. The vehicle must be in good condition and have a particular minimum value.
- Age: You must be of legal age, usually 18 years or older, to apply.
- Income: Lenders typically require proof of income to make sure you can repay the money. This could be in the form of a job, social security benefits, or other sources of income.
- Residency: You must be a resident of the state where you apply for the extra cash.
- Car Title: The vehicle must be in your name and free of liens or encumbrances.
- Identification: You must provide a government-issued photo ID, namely a driver’s license, passport, or state ID.
- Vehicle documentation: You may be required to provide proof of registration and insurance for your vehicle.
It’s important to check with the specific lender you are interested in to see if there are any additional requirements. It’s also recommended to compare auto loan options from multiple online lenders to find the best terms for your needs.
What Documents Are Required For Car Title Loans?
Although different creditors have preferences when it comes to requirements, there are certain documents you must have when applying. So, ensure you check and confirm with your preferred lender before you make your request.
Below are some of the standard documents you should prepare ahead:
- Car title: The car title must be in your name and free of liens or encumbrances.
- Proof of income: Lenders typically require proof of income to ensure you can repay the personal loan, such as a pay stub, bank statement, or government benefits statement.
- Photo ID: You will need a government-issued photo ID, namely a driver’s license, passport, or state ID.
- Vehicle documentation: You may need to provide proof of registration and insurance for your car.
- Proof of residency: You will need to provide proof of residency, namely a utility bill or bank statement, to show that you live in the state where you are applying.
How To Get A Car Title Loan
For a better chance at securing extra cash from your vehicle, we’ve compiled simple and practical steps you should follow. Try to follow them in the order they appear for a swifter and more convenient application and approval process.
- Research lenders: Compare the options from multiple lenders to find the best terms for your needs.
- Gather documents: Organize all the required documents, like your car title, proof of income, photo ID, vehicle documentation, and proof of residency.
- Apply: Complete the auto loan application online or in person and provide the required documents.
- Submit the vehicle for inspection: The lender may inspect the vehicle to determine its value, which will be used to determine the auto loan amount.
- Receive offer: If approved, the lender will provide you with a personal loan offer, including the auto loan amount, interest rate, and repayment terms.
- Sign the agreement: If you accept the auto loan offer, you will need to sign the personal loan agreement, which will detail the terms and conditions of the credit.
- Get the cash: Once you have signed the loan agreement, you will receive the amount in cash.
- Make payments: You will be required to make regular payments, including interest, until the amount is paid in full.
Can I Get an Auto Title Loan If I Have Bad Credit?
Yes, getting a car title loan with bad credit is possible. They are often marketed as an option for people with bad credit or no credit because they use the car as collateral rather than relying on the borrower’s credit history. This means the lender may be more willing to approve the application, even if the borrower has a poor credit history.
However, this convenience can come at a cost. Because it often has high-interest rates, and the lender can repossess the vehicle if the borrower defaults on the cash advance.
It’s essential to carefully consider the terms and conditions of the auto loan and ensure that you can repay it before borrowing. It’s also a good idea to compare the options from multiple online lenders to find the best terms for your needs.
Pros And Cons Of Car Title Loans
Car title loans can provide quick access to cash but also have several potential drawbacks. It’s important to consider the pros and cons of these types of credit before deciding.
|Quick access to cash: Car title loans can provide quick access to money in an emergency or for unexpected expenses.||High-interest rates: These credits often have much higher interest rates than traditional ones, making it more challenging to repay.|
|No credit check required: They are frequently marketed as an option for people with bad credit or no credit because they use the vehicle as collateral rather than relying on the borrower’s credit history.||Risk of losing your vehicle: If you default on the auto loan, the lender can repossess your car. This can be a significant risk, especially if the vehicle is your primary means of transportation.|
|Easy application process: The applications are typically straightforward. They can be approved and funded in just a few hours.||Short repayment terms: They typically have short repayment terms, making it challenging to repay the funds on time.|
|Flexible amounts: Car title loans can offer flexible amounts, which you can tailor to the borrower’s specific needs and budget.|
|No restrictions on the use of funds: Unlike some other types, there are no restrictions on how you can use the funds from this source. This allows you to use the funds as you see fit, whether to cover unexpected expenses, make a large purchase, or pay off debt.|
While car title loans are not available in Canada, it’s essential to consider all options carefully before deciding. It’s crucial to understand the terms and conditions of any auto or personal loan, including the repayment terms, interest rate, and fees, as well as the potential impact on your credit score.
By taking the time to research your options and make an informed decision, you can ensure that you choose one that meets your needs and helps you achieve your financial goals.
Are car title loans legal in Canada?
Yes, car title loans are available in Canada. Although using a vehicle as collateral for security is not recognized under Canadian law, auto loans are still available in Canada, and borrowers who need cash may apply or consider alternatives, like payday, personal loans, or borrowing from friends or family.
Do title credits go on my credit score?
They appear on your credit score only sometimes, as they are not commonly reported to the major credit bureaus. However, if you default on the auto loan and the lender takes possession of your vehicle, this could negatively impact your credit score.
Do you need a good credit score for a car loan?
A good credit score can help you get a lower interest rate, but it is not necessarily a requirement. Some lenders may approve loans for borrowers with lower credit scores, but the interest rates may be higher.
What happens if I pay off a car cash advance early?
If you pay off a vehicle credit early, you may save on interest charges. Some lenders may also charge a prepayment penalty, so it’s important to check the terms and conditions of the auto loan before paying it off early.
How hard is it to get a car advance with a 670 credit score?
A 670 credit score is considered a good credit score, but the ease of getting it will depend on various factors, such as your income, debt-to-income ratio, and the lender’s underwriting standards. With a good credit score and stable income, you can secure it with favourable terms.