How Safe And Reliable Are Title Loans?
With the expanding demand and competition in the financial markets, there are multiple debt borrowing options available in the market to meet up your short term or long term financial needs. It can become very confusing to choose the most appropriate type of financing to suit your circumstances. Once you have decided to borrow money, the next big decision is to find a reliable lender. Specific online portals like www.loancall.com are an excellent platform to find a lender and visa versa. To get an expert financial advice on how to handle your investments visit www.investopedia.com.
Although banks are still the premium choice for borrowers, due to the rigidity and delay in the approval procedure, people are forced to look for other revenues. That is how title loans have gained popularity for some time. Car title loans are short-term loans acquired by the borrower by pledging the title of their vehicle to the lender as collateral. The lender has right to place a loan on the title of the car until the borrower repays the loan amount with interest. In case he/she defaults, the lender can recover their amount by auctioning or lending out the vehicle to a third party. As soon as the payment is made the loan on the title is removed and the borrower regains ownership.
Some of the pros of availing a title loan include: its quick and user-friendly approval process. Since the credit check is not required, a lot of time in the approval process is saved. Just by submitting necessary personal ID, social security no, living proof, financial details and vehicle documents, the loan is sanctioned within hours of application, which makes it the most suitable option for people in urgent need. Only the title is the vehicle is temporarily transferred as collateral to the lender, but the borrower has full access and rights to use the vehicle even after that. The flexibility in the payment of the loan is another advantage. You can choose from the option of repaying the entire amount through a single down payment or on a monthly basis covered under year wise installment plan.
With the above underlying benefit, title loans have sometimes received criticism due to specific issues. The most highlighted limitation of title loans is the exorbitant interest rate applicable which at times can exceed 100%. Since these are short-term loans, initially this factor may not affect much, but with every extended month a borrower does not pay the lender back for, the interest rate also increases. The borrowers to keep their vehicle, would opt for extending or renewing the loan period and rate. This way to get rid of one trouble you end up paying much more than what you have borrowed. In case of the borrower defaulting the repayment of the loan, the lender is left with the option of recovering the amount by auctioning the vehicle. But they do not get a competitive rate in the auction compared to the market standards. Thus, both the parties are at a loss in such case.
Therefore, wise and calculated choices need to be made while going in for title loan. Otherwise, you may end up in deeper debt at a later date.