What is a Car Title Loan

A car title loan is something that has been around, in various forms, for many years. These types of loans are also sometimes referred to as cash advances or payday loans. However, with this type of loan, you are required to leave your car title as collateral for the money that you are borrowing. This type of loan is designed for those that need cash in an emergency situation. For that use, it can be beneficial if you are careful. Here are some things to consider about car title loans and how they work. 

How They Work

Most car title loans start out in the same way. Someone runs across an emergency situation that they need some cash for. They are still a long ways away from payday and they need money immediately. A family member might have grown ill or their car might have broken down. Regardless of the reason, sometimes people need money quickly with no other means to get it. They locate a cash advance store for their emergency funds. The cash advance lender gives them some forms to fill out, asking for their basic personal information. The forms usually take about 15 to 20 minutes to complete, depending on the company. 

As long as the person applying for the money has a source of income and does not have any outstanding loan with them in the past, they should be able to get approved for the loan. They have to leave their car title with the cash advance company and then the money that they need is wired into their bank account. In most cases, they will get the money within 24 hours. In some cases, this process only takes a few hours. The borrower is required to repay the money within a short period of time, or be charged late fees. If the debt is unpaid for a long period of time, the cash advance store can actually legally repossess the car from the owner. They can then take the car and sell it to repay the debt. 

Risks of Car Title Loans

With this type of loan, there are several risks that you will want to be aware of. The worst thing about this type of loan is that the interest rate is very high. In most cases, you will pay as much as 300% APR for a short term loan. In addition to the high interest rate, they will charge you very high fees if you are late. Sometimes, this can make the loan balance much higher than it originally was. 

In addition to the financial risks involved with this type of arrangement, you also risk losing your car as a result of this loan. If you can not afford to pay off the loan, they will find you and take your car away from you. This can compound your problems even worse than they already are. Just be careful with this type of loan and consider the risks before you get involved.