If you need extra cash quickly and you have a significant amount of equity accumulated in your vehicle, you may be able to apply for a car title loan. Vehicle title loans provide you with a convenient way to access your vehicle’s equity. Many auto title lenders do not require you to have a great credit score, and the loan process can often be completed within a few days or less. This makes this a fast and easy loan option for many car owners to consider. However, before you move forward with your plan to apply for a title loan, it is important to learn more about the loan you are applying for. Ask your lender these five important questions so that you are better prepared for the loan you are thinking about applying for.
What Is the Maximum Loan Amount?
Before you apply for your loan, you need to ensure that you will get the full amount of cash you need. Many people have plans to use the loan proceeds to pay for home repairs, an insurance deductible or other unexpected expenses. Loan amounts from car title loans may vary from a few hundred dollars to over a thousand dollars.
What Are the Loan Fees?
When your loan is due, you will typically be required to pay the loan balance in full along with loan fees and interest charges. Loan fees on title loans can be expensive, and they may equate to several hundred dollars in some cases. You may discover that there are more affordable financial solutions available for your current situation after you learn more about what your lender’s loan fees are.
What Is the Interest Rate?
It is also important to determine what the interest rate will be and what the total interest cost is. The interest rate on a title loan may be one of the highest rates you can pay on borrowed funds. Using a credit card or another financial option may be more affordable. Ensure that you compare this rate against other loan options available to find the lowest rate possible.
When Is the Due Date?
Many people who apply for a car title loan are surprised to learn how short these loans are. The reality is that most are due within 30 days, and some are due within a couple of weeks. When you need access to extra cash to pay for unexpected expenses that you did not budget for, it may reasonably take you several months or longer to save up enough money to pay off the loan balance. Some lenders will renew the loan upon request, but this can result in additional loan fees and interest charges. It is important that you have a strategy for paying the loan balance off in full by the due date before you apply for a car title loan.
What Is the Total Amount Due?
You also need to ask your lender what the specific and final amount due will be at the specified due date. You cannot budget for this figure unless you have a firm figure to work with. Some may try to give you a broken accounting of the fees and the interest rate, but hold firm to the goal of getting the total amount due. Compare this to how much you are borrowing to determine the total cost associated with getting the loan. In addition, ensure that you can pay this amount off in full by the due date.
A car title loan can be a blessing in some ways. For example, if you have no other financial solution available and need cash urgently, this type of loan can be a lifesaver. However, when the loan comes due within a few weeks, many loan applicants are unprepared to pay the balance off in full, and they may find themselves in a more stressful situation as a result. By asking your lender these questions, you can more easily determine if this is the right financial solution for your current needs.