A title loan is a saviour for borrowers seeking quick, hassle-free cash. It is usually golden in cases of emergency. There are a number of alternatives to a title loan. However, a borrower will always have to assess the disadvantages.
What is a title loan?
A title loan is a secured facility that allows borrowers to use a vehicle as a guarantee, usually under a payday repayment arrangement. In most cases, a car title is used. However, other vehicles such as boats and motorcycles can also be used. These loans usually have fast approval times, are simple, short term and usually provide between 25% and 50% of the value of the vehicle being used as security. However, the interest rates on title loans can be a bit high, although the benefits may outweigh this potential issue.
How does it work?
Deciding to use a title for a loan means that for the duration of the arrangement, the vehicle technically becomes the property of the lender but remains in the possession of the borrower. In order to obtain the loan, the borrower will need a lien-free title to prove ownership and a current valuation report for the vehicle. Some lenders will carry out their own valuation of the vehicle. Once the loan is approved, the owner will hand over the title to the lender to be kept until repayment is complete. The repayment period could be between 30 days and a year. The loan itself is usually the amount borrowed, accumulated interest and any connected fees.
Assessing the alternatives
- Personal loans
A personal loan from a bank is the predominant alternative to a title loan, but this can be a long and tedious process. Accessing a personal loan from a bank will hinge on your credit rating. Having bad credit is grounds for refusal. However, with a title loan, an unfavourable credit rating is rarely an issue as the vehicle will stand as surety.
- Selling a vehicle
Selling your vehicle could raise the cash you need, but then you would be left without your personal transportation. Added to that, there is no guarantee on the length of time it will take to identify a buyer and to process the sale, especially if the potential owner needs a loan for the purchase. In contrast, a loan allows a borrower to keep his vehicle even while repaying the debt.
- Using a credit card or cash advance
A credit card is another alternative, but it too has drawbacks. Credit cards are capped at a figure that could be less than the amount you might need. At the same time, not all credit cards allow for cash advances. Also, obtaining a credit card requires a solid credit history. However, your credit history is not as critical when accessing a title loan.
Get fast, easy cash with a title loan
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