A title loan or a car title loan is a kind of secured loan where borrowers will put their vehicle as security or collateral. The borrowers have to allow the lender to place a lien on their car title, while surrendering the title temporarily, in exchange for the loan amount. Once the debt is repaid, the lien is removed, and the title is returned. This type of loan is a short term loan, designed for exigencies and unplanned expenses. There are no credit checks made and lenders only consider the value and condition of the car.
The application and approval process
- The borrower can look for car title loan places near me to find all the lenders for car title loans in your area. Once they have gone through the list and decided on the lenders they can approach, they need to get the documentation right.
- A valid government ID, proof of income, mail to prove residency, car insurance and registration, references and a lien-free car title are required while making an application.
- The lenders will then determine the value of the car based on the make, model and current condition of the car. They don’t check your credit scores. The maximum loan amount is determined by the value of the collateral, that is, your car.
- Most lenders offer half of the collateral’s value as loan and most use the Kelley Blue Book to decide on the value and loan amount.
- The interest rates vary from state to state and the time period required for repayment.
- The Internet has completely revolutionized relationship management. Many car loan companies offer online applications and appear in online searches if you check with keywords like title loan companies near me. They also offer quick preapproval or approval of loans. Sometimes, you can get the loan amount a few hours after making a loan application, learn here.
- The loan amount can be as less as $100.
Does a Car Loan affect your Credit Score?
A car loan is completely different from loans authorized by conventional lenders like banks or credit unions. A car title loan will not affect your credit score too much. You are using your car as collateral to get a secured loan. An unsecured loan needs credit checks and you will need to have good credit scores to get the loan money. But with a car title loan, you don’t need credit scores at all as there are no credit score checks performed while forwarding a car title loan. As you are borrowing money off of your car there is no need to check your credit history. Such loans don’t go on your credit scores as debt, as you have an asset as your line of credit. A car title loan will not affect the credit score in a negative manner.