Fast Auto Loans – Are car title loans a good idea?
- April 9, 2020
- 4 min read
- 68 reads
When you are in a pinch and need money now, a fast auto loan can be one way of getting cash in your pocket immediately. Fast auto loan providers offer short term loans that give you money on the spot.
What are Fast Auto Loans?
Fast auto loans have also been known as car ‘title loans,’ ‘pink slip loans,’ and ‘title pledges.’ Despite their many names, they all work the same. A lender will grant you a short term loan placed against the equity of your vehicle.
They are an instant quick fix that lends money for up to three months. Usual lending terms are 30 – 90 days. To get a car title loan, you must own 100% of your vehicle and have a clean and clear record with no liens on the title of the car. Alternatively, you must own the majority of equity within your vehicle.
Cars are not the only vehicles able to be used as equity against an auto loan. Lenders will consider trucks, caravans, and motorbikes as equity options as long as there is enough ownership equity within the vehicle.
How Fast Auto Loans Work
You go to a loan broker with:
- Photo ID
- Your vehicle for their inspection
- Proof of insurance
- Your vehicle title
To get the loan, you must hand over your car title to the lender. Once the loan is paid in full, the lender will return your vehicle title.
How Much Can You Loan?
The lender will loan anywhere between $100 – $5,500 depending on the value of the vehicle. Interest on the loan is in the vicinity of around 25% per month. It is an outrageous amount of interest that needs to be considered carefully.
Often lenders will allow you to roll over your loan to the next month if you are unable to pay the loan in full along with the fees incurred. Loan rollovers, of course, come with additional charges.
The main risk with fast auto loans is the fees. They are so high that you may struggle to get out of the cycle of loaning with them for quite some time.
Scenario: if you are borrowing $2000 for one month, your interest on that is $500. That means that after your 30-day loan term, you have to return to the lender with $2,500 to get your vehicle title back.
Let’s say you were unable to pay the $2,500 that month. The lender agrees to roll your loan over another 30 days; you will now be paying $750 interest within two months on a $2,000 loan.
Lenders have to confirm the APR’s on the loan agreement, so if you are going to get a fast auto loan, be sure to review the APR information.
Can’t repay a Fast Auto Loan?
What happens when you can’t pay your loan back? When you are unable to repay a fast auto loan in short – your vehicle will get repossessed.
You can get your vehicle back once you pay the new fees that have occurred from the repossession. If you don’t have the money to do so, you may find yourself without transport.
Alternatives to Fast Auto Loans?
There are many alternative options instead of fast auto loans or car title loans that don’t have such enormous fees associated with them.
Online personal loans can get money into your account within days of acceptance. Some applications take less than five minutes and are worth consideration. Most personal loans are going to have a much lower interest rate and APR’s associated with them.
Our online personal loan calculator is a free tool that allows you to compare multiple lenders at once without affecting your credit score. Our comparison calculator ensures that you get the best interest rates and APR’s for the type of loan you require quickly.
The added benefit of a personal loan is that you are not going to have to use your vehicle equity.
Some personal loan lenders offer reasonable rates for those with bad credit. 5KFunds is a great place to start. They offer free comparisons from over 100 approved lenders. Without a credit score minimum, 5kFunds can find a lender that is right for everyone.
Some payday loan lenders can offer short term loans quickly. You don’t always need a good credit score, there are some payday lenders that offer no credit check payday loans.
Sum It Up
Fast Auto Loans are an expensive and risky way of getting cash now, and alternatives should be considered. They come with high risks, such as losing your vehicle. Car title loan’s astronomical fees are hard to pay back and could keep you in a debt cycle that is hard to break.
The best alternative is, of course, to set aside money in an emergency fund. If you are struggling to keep in the black, there are ways to regain your financial peace.
At Financer.com, we value your feedback. Have you had experience with fast auto loans? If so, leave a comment below.