Four Important Facts About Auto Title Loans
Selecting a debt instrument among the many available is no easy choice
. This is especially true for those who are considering going for auto title loans because of the relatively novel nature of the loan in the debt market. The key to making the right decision is to collect as much relevant information as possible and then use it to compare the different options you have. Following are some questions that most borrowers ask about title loans when pondering over the choices they have.What is the time period of an auto title loan?
Title loans are short term loans. Hence, borrowers are expected to pay back their loans within 36 months. This term however can be shortened or extended upon the borrower"s request. It must be noted that while shortening of the payback time does not require borrowers to pay a penalty, extending the period leads to rise in the interest rate with every passing month. The increase in interest rate occurs to compensate the diminishing value of the vehicle that was used as collateral.
What makes an auto title loan preferable compared to a bank loan?
Several factors make title loans preferable compared to bank loans. Perhaps the most important one is the lack of any credit score requirement. Yes, while banks and other high street lending institutions use your credit score to judge you as a borrower and to decide the interest rate you will be offered, lenders of title loans do not.
Another benefit of going for an auto title loan is the speed at which loan applications are processed and cash loans are handed out. Thirdly and equally importantly, unlike other secured loans offered by banks (title loans are secured in nature), the collateral required by lenders of title loans is as low as $4,000 (in the form of a vehicle).
What makes an auto title loan preferable compared to a pawn loan?
The only benefit of choosing a pawn loan over a title loan is that your credit score will remain unscathed if you default on a pawn loan while the same will be negatively affected if you default on an auto title loan. This benefit can be enjoyed by those who end up defaulting on a loan. For people like you who have all the intention of paying back, a title loan is preferable because unlike lenders of pawn loans, lenders of auto title loans will allow you to keep using the vehicle that you will use as collateral.
How is a title loan better than a Payday loan?
The main difference between a payday loan and an auto title loan is that of the amount borrowed to you. Since a payday loan is based on your monthly income, the amount offered is relatively small that has been backed by your vehicle. Even if the worth of your vehicle is the same as your monthly income, auto title lenders will lend you more than payday lenders do.
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