Title Loans

title loanA loan contract term comes in many forms. Title loans are a type of secured loans. Learn more on what is a title loan and how to apply for one.

Lenders issue car loans for an amount of money over a period of time. These types of loans require security. So, as a borrower, you will give the title of the vehicle as collateral. This could be car, truck or motorcycle.

How do title loans work?

You can apply for a title loan either through online lenders or at a store. A few documents will be needed:

  • An application form
  • Title of the vehicle
  • A photo ID
  • A photograph of the vehicle

A borrower will first assess the car’s value. This information is vital since the loan is given based on a percentage of the car’s worth. The average amount is given is often $1000. You will be expected to pay the loan amount plus a monthly fee.

There are two kinds of title loans offered:

  1. single payment loans
  2. installment loans

Single payment loans require you to repay the loan in one lump sum while installment loans require you to make multiple payments over a period of time.

There are some lenders who would want to look over a vehicle in person. Others will require an extra set of car keys. Once approved, the loan is granted in exchange for your car title. Most lenders will give you 30 days to repay the loan but longer loan periods are also fairly common.

Laws and Practices of Car Title Lenders

Terms will vary depending on lenders. However, generally lenders will operate under these conditions:

  • They don’t check credit
  • Don’t require proof of income
  • Provide loans worth 40% or less of the car’s value

If you fail to repay on the due date, the lender might give you 30 more days. This is called ‘rolling over’. Remember you will have to pay an extra monthly fee. Don’t allow this to happen several times. You will eventually pay a lot more than you borrowed. In extreme cases, you might completely fail to repay the lender and lose your car.

Borrowers will often require you to install a GPS tracker. If you fail to repay, a lender repossesses and sells the car. The borrower will also be charged fees for repossession and storage.

How Much Does a Car Title Loan Cost?

The fees will often depend on the lender. However, single-payment loans have an average APR of 300%. Installment loans have an average APR of 259%.

At the end of the loans’ term, you pay the final fees and remaining principal. These fees often total to 25% of the loan’s value. So a single-payment loan of $1,000 means you will pay $1,250 on the due date.

As you compare 27 lenders at Financer.com, ensure you are well informed of the total costs of title loans.

How is APR Calculated on a Car Title Loan?

The following factors are kept in mind when calculating the APR:

  • The amount of money borrowed
  • The monthly interest rate
  • The fees amount
  • The loan duration

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