A car title loan is a type of loan that involves a person putting their car down as collateral. These loans are typically marketed to people with poor credit scores. The poorer a person’s credit score is, the more difficult it will be for them to get an ordinary loan, i.e., one that’s given to people based exclusively on their credit score. If you have a poor score, now might be the time to look into a car title loan. This post will explore them, helping you to decide whether or not they are the right type of loan for you.
Finding a Reliable Lender
The first thing you need to do if you are considering a loan is to find a reliable lender. Under no circumstances should you rush the process of finding a company to borrow money from. Some lenders employ unethical lending practices. If you are not careful, you could end up taking a loan from one of them. A good way to determine a lender’s suitability is to verify that they have a license. No licensed, regulated lender is going to resort to intimidation to get their money back. You also need to prioritize finding direct lenders for bad credit installment loans if you have poor credit. This is because attempting to take a loan out with an ordinary lender when your credit is bad is going to lead to your score dropping even further. Every time a hard search is performed, your credit score falls. If you are not eligible for a loan but apply anyway, your score will drop significantly.
Justifying Your Loan
Before taking a loan out, you need to be able to justify it. A lot of people make the mistake of borrowing money purely for the sake of it. When you borrow money, however, you run the risk of defaulting, even if you are in a good financial position. The only time the threat of default isn’t there is if you have a significant amount of savings and can afford to pay your loan off. The reason you need to be able to justify your loan is that if you default on it, you need to be confident that the loan was worth the consequences you’ll then have to deal with. In addition to being able to justify your loan, you also need to make sure that you borrow the right amount. Do not borrow more than you need to. Making sure you borrow the right amount is something that will be covered in more detail later on. Additionally, ensure that you are honest in your loan application. A lot of people inflate their incomes to get a higher amount of money. Do not do this.
Understanding the Consequences
In addition to the above, you also need to take some time to understand what the consequences of defaulting on a loan are. If you take out a total loan and are unable to repay it, you will lose ownership of your car. Your car’s title will be put down as collateral when you take out a title loan, which means that if you fail to make repayments, the lender will seize ownership of the vehicle. You will have no legal recourse for getting your vehicle back. Some lenders give borrowers a grace period where if they are able to repay their loan in full, they can regain ownership of their cars. In addition to losing ownership of your car, a default will be registered on your credit report.
The default will make you look like an untrustworthy borrower, which means you will not be able to take a loan out again in the future. Being unable to borrow money again in the future means if any disasters happen or you find yourself in a financial emergency, you will not have any options other than to sell your belongings. Defaulting also means that you will not be able to take out a credit card or a loan for a period of up to six years or until you pay back your debt and full. Bear in mind that in addition to having your car taken, administrative fees could be added on top, which means you could end up paying far more than the loan was worth in the first place.
Borrowing the Right Amount
As mentioned above, you need to make sure that you borrow the right amount of money. Do not get into the habit of borrowing more than you need to. Even if you’re in a good enough financial position to make all of your repayments on time, borrowing more than you need to is just silly. The total amount of debt you’re in will build up and this will show on your credit report. A high amount of debt makes you look like an irresponsible borrower.
With that said, every single time you make a payment toward one of your loans, your credit score will improve. Sit down and spend some time working out the exact sum that you need to borrow. Bear in mind if you’re taking out a title loan, you will not be able to borrow more than your car’s value. Finally, when you make a loan application, the lender will ask you why you are trying to borrow money. Make sure that you tell them the truth.
Making Repayments on Time
Finally, make sure that you make each repayment on time. Missing a single repayment could lead to your loan defaulting. With that said, most lenders are very forgiving and will give you the opportunity to make repayment again. If you miss a repayment three times in a row, the chances are that your loan will default, however. A good way to ensure that your repayments are made on time is to set up a direct debit. A direct debit will ensure that money is sent straight to the lender from your account on the specified repayment dates.
Title loans can be a good way to get money fast. However, there are a few considerations that need to be made when you are borrowing money. The guidance given here will hopefully help you to understand what they are. Spend some time thinking about each point made in this post.
