A title loan, also known as a car title loan or an auto title loan, uses the borrower’s vehicle to secure funding. If you are considering a title loan, you may wonder how much money you could get for one of these loans. The amount you can get will depend on a few factors, including the value of your car. Below is more information on how much you can get for a title loan, along with details on these loans in general.
How Do Lenders Determine Car Title Loan Value?
The flexible thing about title loans is that your credit score and credit history are not a huge determination for eligibility. This is largely because title loans require a vehicle title for security. And so, instead of focusing on your credit, lenders will pay attention to other factors to determine how much money to give out.
The Value of Your Vehicle
The value of your vehicle is determined by the age, make, model, and condition. Keep in mind to be approved for a car title loan, your car needs to be in road-safe working condition. Because these loans are secured with a vehicle title, your car must be worth a certain amount. And the loan amount will largely depend on the value of your vehicle.
Another thing a potential lender will look at is your income. Your monthly income will give them a good idea of how much you can afford to pay each month.
Your Ability To Repay the Loan
Your ability to repay a loan encompasses your income and monthly expenses. With this information, your lender can gauge how likely you are to repay your loan. A title loan can be a long-term or short-term loan; your lender will go over details, which will also be impacted by your ability to repay.
Generally, maximum loan amounts can range from a few hundred dollars to thousands. Your vehicle’s value should give you a good idea of how much cash you might get from a title loan. Also, like any other loan option, you never have to borrow more funds than you need, even if approved.
What Determines Title Loan Interest Rates?
The loan amount is definitely an important thing to think about with a lending option. However, it is also essential to consider your loan’s interest rates. Because title loans are bad credit loans, their interest rates will be pretty high. Title loan interest rates can range anywhere between 50% to 300% APR!
And so, although these loans may be a solution to your short-term emergency, they may not be the smartest solution. If you are currently in a title loan contract, you may be able to get out of the title loan. If you haven’t taken out a title loan yet, you should know about some of the different cons that can come with such a high-interest loan.
Some Cons of Car Title Loans To Keep In Mind
There are some things you should know about title loans before you decide to take one out:
It Can Be Hard and Expensive To Repay These Loans
Because the interest rates for these loans can be high, you will likely be paying double the amount you borrowed! That is just not a good deal for a loan. On top of that, you may find it difficult to make monthly payments depending on your repayment plan.
Your Car Will Be at Risk if You Cannot Repay Your Loan
Another thing to remember is that your car is at risk when you take out a car title loan. If you cannot make payments, your lender has the right to repossess your vehicle. This can cause havoc on your life if you use your vehicle for necessary transportation. So think twice before signing over your car’s title to borrow money.
Car Title Loan Lenders Are Often Predatory
Title loan lenders know that borrowers with bad credit may not have a ton of options, so they may try and entice you to take out one of their loans. But no matter how good one of these loans sounds, they are expensive and usually not worth it.
You Might Find Yourself Trapped in a Cycle of Debt
A cycle debt occurs when you have to take out one or multiple loans to pay off an existing one. This happens when your current loan is unmanageable or expensive. Loan options like auto title loans and payday loans tend to have a tendency to trap their borrowers in a cycle of debt.
Title Loan Alternatives to Consider
Okay, now that you know that car title loans are bad news, you may be wondering what other options you have when borrowing funds with bad credit or no credit. Here are some things you can consider when you need fast cash that is not a title loan:
Borrow From a Bad Credit Personal Loan
When most people think of personal loans, they may think of bank loans that require an excellent credit score. However, that is not always the case. Many private lenders make personal loans available to borrowers with bad credit scores. Personal loans often have better interest rates and repayment terms. They also don’t require collateral, making them a much better option than title loans.
Look Into a Side Job
A side job can be a great way to make extra money, eliminating the need to apply for a title loan. You can look into contract work, freelance work, or a part-time job. Working extra for even a few weeks can mean hundreds of dollars to add to your income.
Borrow Funds From Friends and Family
Another option you may be able to consider is borrowing money from friends and family. The great thing about this option is that you may not have to pay interest, and you may get flexible repayment. However, it can definitely be a little awkward to ask for financial help.
Sell Some Stuff
Most of us have some stuff they can sell for some extra cash. And so, it may be a good idea to go around your place and find something you can part with for some quick cash.
Improve Your Credit
If you don’t need money immediately, you can try to improve your credit score. With a better score, you will access better financial products from several financial institutions—competitive rates, better repayment terms, and more money. Making payments on time, paying off loans and credit cards, seeking credit counseling,
Apply for Assistance Programs
If you are struggling financially due to job loss and have dependents, you may qualify for long-term hardship financial assistance. These programs can help individuals and families with everything from financial aid to job placement.
If you want to learn more about title loans, or a salvage title loan, check out our other helpful blogs!