A car title loan, or simply title loan, is a loan where the borrower provides their car title as collateral for a loan.
These loans are typically short-term,
and tend to carry higher interest rates than other sources of credit.
These loans have higher interest rates than other sources of credit
because the lender typically does not check credit and that the only
consideration for the loan is the value and condition of the vehicle.
Most title loans can be acquired in 15
minutes or less on loan amounts as little as $100. Most other financial
institutions will not loan under $1000 to someone without any credit as
they deem these not profitable and too risky. In addition to verifying
the borrower’s collateral, many lenders verify that the borrower is
employed or has some other source of regular income. The lenders do not
generally consider the borrower’s credit score. The loan is secured by
the title to the vehicle.
The maximum amount of the loan is
determined by the collateral. Typical lenders will offer up to half of
the car’s resale value, though some will go higher. Most lenders use
the Black Book to find the resale value of vehicles. The borrower must
hold a clear title to the car; this means that the car must be paid in
full with no liens or current financing. Most lenders will also require
the borrower to have full insurance on the vehicle.
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