Car title loans: introduction

The car title loans are also called "auto title loans" or generally "title loans". This loan is not a long-term loan instead it is a loan for a small period. In this loan, the car of the loan borrower is used as collateral. It is necessary that the borrower should be the car holder. This loan is mostly for thirty days. This loan comes with such a penalty that if the borrower can’t repay the loan amount in time, then the lender can claim the ownership of the borrower’s car and sell it to recover the loan amount.

Target market

It is a sheer truth that most of the car title loan lenders target those people who have a meager income and bad credit. These companies charge very higher interest rates. The people who have credit cards or bank loans are not allowed to take this loan. The car title loan lenders are also well known by the name of "predatory lenders" because they prey on the people who need cash in emergency situations. It is a good practice that the lenders should clearly define the interest rate to the borrower at the time the loan agreement is signed because if the loan is short-term, then the borrower may not realize that the defined rate is not annualized.

Methods associated with car title loans which require your attention

The car title loans are offered by many lenders even if there is no clearly defined title. The loans which are provided are generally for a funding amount between 25% and 50% percent of the vehicle’s value. These kinds of loans mostly fall in the range from $100 to $5,500. It is not necessary that the loan amount should always fall in this range because there are many cases where such loans exceed $10,000.

The applications related to these car title loans can be filled online or at any storefront. To complete the form, the borrower needs to present the title, certificate of insurance, photo for identification, and the car itself. Most of the lenders require that you should have duplicate car keys and they also install a GPS tracker to know the location of the car and a device which can stop the ignition of the car (to repossess the car). The lender takes the ownership of the car when the funds are released to the borrower and keeps the ownership till the loan is repaid.

Not only the principal balance of the loan, but the lenders could also require some additional charges to be paid like the roadside service plan, which piles up the amount which will be due.

If a point comes at which the borrower can’t repay the loan within the period which is allowed, then the lender might offer to roll over the debt into a new loan which includes a late fee and a higher interest rate. This process keeps on going, and the borrower’s debt keeps on increasing to a point where it becomes impossible for the borrower to repay the loan and hence the lender may decide to repossess the car.

Haris is a Digital marketing specialist and part time blogger. And he loves to write about home improvement niches.