How a Title Loan Works as an Emergency Loan

Car title loans are meant to provide emergency loans for people with bad credit but have equity in their car, with the title of the car in their name. Having equity in your car means that you own the car outright without any lien on it. Car title loans are also called pink slip loans. Car title loan is a way to get fast and quick loans because it does not require any credit check since you are borrowing against the equity of your car.

We will take a look at three things you need to know about taking out a car title loan.

• You must Have Equity

To get a car title loan you must have equity in your car. Equity is the value of your car. This means that your car must have a clear title. Having a clear title means that you own the car outright without any lien. Your lender will also need to inspect the car to ensure it is in good condition before you can get a car title loan.

• High Interest Rates

Car title Loans have high interest rates because the lenders need to find a way to manage the risk involved since most borrowers are high risk borrowers without good credit score. This is why the interest rates for this type of loan can be as high as 25% per month. This will translate into an Annual Percentage Rate (APR) of around 300%. That is higher than interest rates that you will get with other forms of loans including credit cards. When you wish to get a car title loan, get offers from as many lenders as possible, so that you can compare the rates to get the best offer.

• You can Lose Your Car

If you are unable to pay your loan, your lender has the legal right to repossess your car and auction it off to cover the loss on the loan.

Before you take out a car title loan, it is important that you look at options at your disposal, if it is possible to get a loan from friends and family try that first. Let taking out a car title loan be your last available option because of the risks involved. If you fall into the hands of predatory lenders, it can even get worse. Hence it is important that you do your due diligence by reading reviews about lenders before you do business with them.