A title is an official document that proves or represents ownership over a certain asset. A title loan therefore is a loan that requires you to place the title of a property that you own (car, home or real estate) for use as a collateral or security to get a loan. The title must be free from administrative or judicial restrictions for it to be useful to get you finance.
The lender holds this title of your property until such a time when either you clear the loan or you fail to meet your obligations. In addition to verifying the collateral submitted, the lender also verifies that the borrower has stable employment or has some source of regular income. Should the borrower fail to pay the loan as agreed, the law allows the lender to sell the asset in order to recover his money.
A title loan is one of the best ways to get faster money (usually within a day), without regard of your credit standing since this loan does not look into these matters. The loan amount however is less than the value of the property and it qualifies you to about 30% to 50% of the original amount of the title of the property.
This type of loan is short term and has a repayment period of less than 60 days. It also tends to have extremely higher interest rates compared to other loans. The interest rate varies from lender to lender and can range between 100% and 350%. It is therefore very important for you to repay the compounded loan amount within the limited span of time in order to recover your title and also to avoid unnecessary legal processes.
Benefits of Title Loans
‧ If you have a bad credit standing, you can still get a loan as your credit score will not be looked into when you apply for the loan.
‧ It is a perfect type of loan if you need emergency funding to meet pressing obligations.
‧ It is also perfect if you require a small amount of money as it allows you to be able to afford to pay on a short period of time.
Dangers of Using Title Loans
‧ Debt is an inescapable fact in our lives and there are a lot of ways that we can repay our debts. While title loans allow you easy access to money to purchase what you want, they come with high interest to the borrower compared to other types of loans. They also have a short repayment period, usually one month, from the time the loan was first obtained.
‧ Another danger is that there is no equity between the value of the loan and the value of the title of the property. This means that you can lose a more valuable property if you are incapacitated in paying the loan. Thus, think through your decision of wanting to get the loan.
This type of loan is very convenient if you know your responsibilities well and also make payments diligently to avoid seizure of your property. Therefore, ensure that you are capable of repaying this loan before you apply for it.
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