Car title loans can be either a great resource to solve a difficult financial problem quickly, or can turn into a costly mistake that can cause a longer term problem.
So, how do we make sure the car title loan is a great resource and not a costly mistake?
This post will take at look at both ends of the spectrum mentioned above, define each of them, and provide some guidance on how to make sure to end up on the right side of the spectrum.
The fact is that total loan cost plays a major part in whether or not a title loan will end up as a great resource or a costly mistake. Understanding how car title loans work is important.
This includes making sure to get a title loan that is a great resource, and some tips for those who may already have a title loan on how to keep it from becoming a costly mistake.
Ends of the Title Loan Spectrum
On one end of the title loan spectrum we have loans that turn out to be great resources that solve difficult financial problems during a time when time is of the essense.
On the other end of the spectrum we have loans that turn out to be costly mistakes that borrowers regret getting into in the first place. The reason for entering the loan can be as simple as convenience or no other option.
With 24 hours to come up with $3,500 for an urgent expense and no savings, no available credit, or other readily available source of funds, what would you do?
If all of your attempts failed, and you owned a vehicle with equity, a car title loan can be a great resource. These loans can provide the short term fast funding to solve difficult lost minute financial problems.
After all, you own the vehicle and have paid it off so the equity in the car is yours to do with what you please. If this equity can make life easier than this is a a good thing.
On the other hand, car title loans can be a costly mistake. We’ve all read about the stories of vehicle owners paying a significant amount of money and still losing their vehicle to the lender.
Some title loans can be very costly and these costs can add up quickly, especially if late payments are involved. This can be the case when the loan is not vetted and entered into quickly without thought of how to repay. These situations are unfortunate and is avoidable.
How to Make sure to End up with a Great Resource and not a Costly Mistake
So how do you make sure, should you need to use the equity in your vehicle, to end with with a great resource and nota costly mistake? For a new title loan, this is done through proper preparation. We’ll talk about that in the next section.
For an existing title loan there are tow choices. This first is to pay the loan as quickly as possible. There are several strategies for paying off a car title loan fast. The second is to refinance the title loan at a better rate and/or term.
Preparation – the key to Ending up with a Great Resource
As you’ve heard us go on about before, preparation is the key to getting the best title loan. Too often borrowers rush into title loans without properly preparing, and they end up going to the closest lender or first search result without looking into the real cost of the loan.
The fact is costs and rates can and do vary widely from lender to lender. Preparation generally consist of at least performing the following:
- Assessing your vehicle value
- Understanding the maximum payment you can afford each month
- Finding the best lender for your situation
- Learning how title loan interest works
- Understanding that walking away from a bad deal is better than staying
Additional Preparation Steps for Online Title Loans
For online title loans, especially those with no inspection or store visit, there are some additional preparation steps. These mainly have to do with taking and uploading pictures of the vehicle.
In the case of a title loan online with no inspection the lender will never see the vehicle in person. They still have to put a value on the vehicle to make the loan.
This is done by looking at pictures to verify vehicle condition instead examining the vehicle in person. It is not the same, but it is necessary and in the lender’s eyes worth the risk. Make sure to understand the different types of online title loans.
So, are car title loans a great resource or a costly mistake? As discussed, they can be both depending on the specific circumstances. These include the vehicle, lender, loan terms, and ability to repay the loan.
For some, they are a great resources for quick cash when other options are not available. For others they can be a costly mistake that is difficult to repay. This is generally more the case when proper preparation steps are not completed and the loan is rushed into. In these cases there may be a way to lower the cost by refinancing.