When you need quick money but you have a bad credit score which prevents you to get traditional short-term loans? A car title loan is a way to have some fast cash with no credit check and limited income verification. This loan type can lead borrowers deeper into debt and, in some cases, even without a car.
It works like in other items. You show your car and lender gives you the money worth of it. He will lend you money and charge interest. If you fail to pay back the money within the agreed-upon time , your car will not be yours anymore. In a car title loan, the lender determines the price of your car based on wholesale values and then gives you a loan based on what he thinks your car is worth. He now holds on to your car’s title until you repay. The loan isn’t same when you bought your car. This loan is a short-term loan with a higher interest rate and if you don’t pay it back timely, it means you’ve sold your car to the lender.
Because this kind of loan is based on equity you’ve built up in your car, you need to own your car outright. If you still owe money on your past car loan, your car’s title is still in the hands of the lender, which means you can’t use it as collateral for another loan. Other requirements may include a minimum age, proof of your residence and proof of income.