Do Title Loans Include Interest Rates?
Car title loans are quite popular, and they’re quite attractive to people who’re desperate for money. While they can deliver quick cash, title loans are perfect for everyone.
Also called a title pawn, a car title loan is a short-term, high interest loan. It’s usually for a small amount of money, such as $1,000 to $2,000. The loan requires a clear vehicle title to be used as collateral. Many experts have concluded that it’s an incredibly expensive type of credit.
Although some say a clear title is always required to get approved for the loan, this isn’t always the case. Some lenders will loan money based on equity that you have in your vehicle, even if you don’t have a clear title.
The Terms and Conditions
The loan agreement that you sign will be different with every lender. The payback period for most title loans is anywhere from 15 to 30 days, but some lenders might give borrowers more than 30 days to repay the loan.
It can be difficult to find title loans that don’t come with triple digit interest rates, also called APR. The interest rate for most forms of credit don’t come anywhere near the interest rates of title loans, which is why many consumers pass on these loans.
A number of lenders will only offer an amount of money that is roughly 25 to 50 percent of your vehicle’s appraised value. Most title loans are for $100 to $5,000, but there are some lenders that offer even larger loan amounts.
The Application Process
Title loan lenders commonly operate online and from local storefronts. You’ll always need to fill out a loan application. To get approved, you’ll need to allow the lender to appraise your vehicle, and you must have a clear title for the car. Most lenders also require proof of insurance and photo ID.
If you ever decide to apply for a title loan, it’s very important to thoroughly review the loan’s terms and conditions. You should also check to make sure you’re not being charged for various additions to the loan agreement, which can be expensive.
Interest Rates and Payment Options
A typical APR for a title loan is 300 percent. Lenders are known to charge 25 percent interest per month, so over the duration of the loan, the interest can add up to a significant amount.
For example, you might have to pay $125 of interest on a $500 loan, and depending on the lender, there might be additional fees. Most lenders offer several ways to repay the loan.
There are automated, online and in-person options. If you don’t mind paying the high interest rate and have stable income, then a title loan could help you get quick cash. However, for others, it’s a terrible way to borrow money.