Car title loans have gained significant popularity over the past year. During the second half of 2023, car title loans in the US were valued at about $80 billion more than they did in the first half. With the increasing demand for these loans, companies like 5 Star Car Title Loans have come forward to offer such loans with complete legal transparency for their clients.
While a car title loan can be convenient if you need cash urgently, understanding their legal and financial aspects is essential. In this article, we’ll look into the core aspects of car title loans you need to familiarize yourself with before deciding to avail of them.
What Are Car Title Loans?
A car title loan is a short-term loan where you put your car up as collateral in case you can’t pay your loan in time. Also known as an auto title loan, the terms of this type of loan assume that you already own a vehicle in your name that you can put up as the cost of not paying your loan in time.
These loans are generally considered a form of subprime lending, and those with a low income or bad credit score who own a vehicle often opt for these loans. All you need to do is present proof that you own the car, have insurance, a driver’s license, and the actual vehicle, and you’ll be good to get the loan.
Loan Amount and Repayment
Lenders typically appraise your car to determine its market value at the time. To ensure they give you a fair market value for your vehicle, you should contact an appraisal service provider independent of the loan process to value it beforehand. An appraiser will review your car’s license and registration, maintenance history, and exterior and interior condition and take it for a test drive if necessary. And while this might not give you the exact match as your lender, it should be in the same ballpark.
Car title loans are usually short-term, with 30 days to a few months to pay back the loans.
Ensure you are clear on the repayment deadline before signing the deal. It’s safe to inquire about how flexible the lender is with the payment schedule in an emergency. Some lenders may offer extensions or payment plans if you encounter unexpected financial difficulties.
While they’re legal in most states, car title rules are often subject to different laws based on the state. For example, a car title loan in Louisiana should be valued at more than $350 and held for at least two months. You must familiarize yourself with your state’s interest rate caps, maximum loan amounts, and consumer protections.
Considering the collateral is your vehicle, you should also ensure that the lender or lending company has a license to give out car title loans and adheres to all tax and legal requirements. Your lender is liable to offer you a legal agreement for this loan, and if one doesn’t, it’s best to find a different lender.
When considering getting a loan of any sort, it’s wise to understand all its nuances and legal terms before you sign for it. Since you’re putting up your vehicle as collateral for a car title loan, you mustn’t make your borrowing decision hastily.
Otherwise, you might lose more money than you got. It’s a good idea to get advice from a financial professional before you opt for this type of loan and only rely on those lenders that are either well-reviewed online or come personally recommended by friends and family.