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Title Credits: How Do They Work?

Basically, a title loan is a type of short-term loan that comes with a higher interest rate. This requires you to show your vehicle as collateral. So, if you don’t have an impressive credit score but still want to get a loan, we recommend considering a title loan. In this article, we will introduce you to this concept. Keep reading to learn more.

What is Title Credit?

First of all, this type of loan allows you to pledge your vehicle as collateral. If you don’t pay off the loan on time, the lender can take your car from you. Typically, these loans are short-term and require you to pay higher interest rates.

So if you have a low credit score, you still have a great opportunity to qualify for a loan. Most lenders don’t even consider your credit score and history.

How does it work?

First of all, you need to find a lender that offers title loans. You can benefit from this service as long as you have a vehicle registered in your name. Before submitting your application, your lender may need to see your car, driver’s license, and proof of ownership.

As soon as your application is approved, you will receive the loan money by handing over the title deed to your vehicle. While loan terms will be determined by the lender, most title loans have a 30-day maturity.

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In other words, when the loan term expires, you repay the one-time payment. You will repay the principal amount plus all fees and interest. Most of these lenders charge a monthly fee of 25% of the loan amount.

For this reason, title loans are not suitable for everyone. Know that if you fail to pay off your loan on time, you will lose access to your car. Therefore, if you want to get this type of loan, make sure you can make your payments on time. After all, you don’t want to risk losing access to your favorite car.

Maximum Credit Amount

As far as your credit limit is concerned, it will be between 25% and 55% of the price of your car. The lender will take a closer look at your car to estimate its value. The loan amount can be $10,000 or more. In most cases, it’s under $10.00, but some people borrow more to meet their needs.

According to reports by the Consumer Financial Protection Bureau, 1 in 5 title loans are unable to repay their loans and lose access to their vehicles. Usually, they take more loans to cover their previous loans.

Long story short, this was an introduction to title loans. If you want to take out such a loan, we recommend that you evaluate the information in this article. This will help you make an informed decision.

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