Most of us have at least once experienced a challenging financial period, in which we are in need of external help to cover necessary expenses. Although it is comforting to have friends and family to rely on for financial backup when needed, this is not always the case. Often, our exit from such difficult situations lies in the hands of borrowing money from banks or other organizations.
Title loans, also referred to as auto title loans or car title loans, are a popular method of borrowing quick cash in times of need. With one of the fastest and easiest ways to apply and receive a money loan, car title loans are suitable for anyone who possesses a vehicle. However, there are associated risks with applying for and using an auto title loan that borrowers should be aware of.
We’ll share a few of the risky factors to consider when deciding on whether to borrow money via title loans in hopes that they’ll help you determine whether they are worth it!
How Do Auto Title Loans Work?
For starters, it’s crucial to fully understand what an auto title loan is and how it works before deciding on whether it is beneficial for you to apply for one.
An auto title loan is granted to individuals who are in possession of a vehicle and the loaned amount will, in most cases, be decided based on the value of the car. In most occasions, an auto title loan will not be granted unless the car has been completely repaid and is fully owned by the borrower. However, there are exceptions, depending on the company that will be authorizing the loan.
The top benefit of car title loans is that you can sometimes receive your cash on the same day and the application process is simple and easy. Furthermore, no credit checks are required in order for the loan to be authorized as you are borrowing against your vehicle and previous credit history does not make a difference.
The Risks Involved
As sweet and easy as auto title loans may seem, it is worth keeping in mind that there are risks involved in borrowing money through this method.
From the start, it is advisable to research into how much money you will be able to borrow against your vehicle. The loaned sum will depend on the condition and value of your car. If the sum is much smaller than your required financial help it may be a good idea to look for alternative money loan options.
As you may have guessed, the largest risk of receiving cash by using your car as collateral is the possibility of losing the vehicle used as security. In most cases, the repayment options will be amended to suit your needs and it is unlikely that such drastic results will occur but it is a factor to keep in mind. When applying for any type of loan it is crucial to make a realistic judgement of your ability to repay your debt. This is especially important in the case of auto title loans as the repayment will usually be required in a shorter period of time, in some cases between 15 and 30 days.
If you are struggling to make payments on time and falling behind schedule, there may be options of extending the repayment of your loan, which could involve a new loan fee or higher interest rates, making it even harder to repay the full sum.
Auto title loans are a great way to get access to money quickly and are a popular way of borrowing for individuals who have previously had bad credit history or have not had a positive experience with the standard banking system. As comfortable and beneficial as they may be, just like with any other form of money loan, there are serious risks that must be considered before making a decision on whether car title loans are worthy.