Being on the brink of default is a very frustrating experience. While your attempts at improving your overall credit standing seem to be not bearing any success at all, you may be tempted to resort to what some consider a kind of predatory lending. With interest rates that can be more than a hundred times greater than other types of loan assistance, title loans have nonetheless become the last resort for cash-strapped consumers and property owners.
What is a Title Loan?
Considered a pink slip loan, a title loan is a kind of loan assistance where the borrower uses his vehicle as collateral for the amount of loan he wishes to secure. To put it quite simply, you exchange the title of your car for a loan.
What are the Requirements to be Eligible for a Title Loan?
According to Utah Money Center, compared to other types of title loans, you only need to have very important thing: the irrefutable proof to the ownership of your vehicle. This means that you must be able to provide adequate and valid proof that you are the owner of the vehicle that you are using to secure a loan. As such, you will be required to show valid ID, the current registration papers of your vehicle, and proof of vehicle insurance.
In relation to your valid ID, you will also be required to submit documents that pertain to your source of income as well as residency. Some lenders might also require a GPS device to be installed in your vehicle to allow them to keep track of its whereabouts. Others will require you to surrender your car keys altogether.
How Much can You Loan?
The amount of your loan will depend on the value of your car. Many of the lenders often refer to the Kelly Blue Book to determine the resale value of your car. Generally, the maximum amount of loan will be around 50 percent of the resale value and at an interest rate that can range from 300 to 500 percent.
What are the Risks?
Well, if you default on your payments, you eventually lose your vehicle.
Title loans should always be your last resort. And even if you find yourself backed against a wall, the exorbitant interest rates plus the risk of losing your vehicle are just too great.