How Do Title Loans Work?

a small wooden car on a desk, with cash, a pen, and a calculator within view.

If a person owns a vehicle and needs access to funds, a title loan may be one of the options they consider. As with any financial decision, consumers should research how a loan works, its terms, and the requirements for paying back the debt. This article explains what title loans are, how they work, their advantages, the drawbacks, and the other options available for consumers seeking cash.

What is a Title Loan?

A title loan is a short-term loan that uses a person’s equity in their vehicle, motorcycle, or boat as collateral.

How Title Loans Work

Title loans are typically dependent on a person having equity in their vehicle. Some title programs will loan money even if the vehicle is not paid off, as long as the amount owed on it is less than what the car is worth. Other programs require the borrower to own the vehicle free and clear.

Advantages and Disadvantages of Title Loans

A title loan may be a viable option for a person who needs a loan and does not have access to other avenues. Borrowers should weigh the advantages and disadvantages of title loans to make sure the decision is right for them.

What Are the Advantages of Title Loans?

Provides a way to borrow money. If the borrower has no credit cards or any other options for borrowing money, a title loan could be a tool for getting them the funds they need.

What Are the Disadvantages of Title Loans?

Non-payment could cause a person to lose their vehicle. The biggest drawback from getting a title loan is that the collateral, a vehicle, may be seized if the person does not repay the loan. The Consumer Financial Protection Bureau (CFPB) reported that one in five borrowers lose their vehicles for failing to pay a title loan.

Alternatives to Title Loans

When a person needs a way to secure funds, they may think a title loan is their best option. However, there are other choices that may work better in securing money fast without using a vehicle as collateral. Negotiate the debt. If there is a specific debt the borrowed money is earmarked for, the person can reach out to the lender and see if they will delay or decrease the payment. Quick cash loans. These small loans offer quick approval and have fewer rigid criteria than borrowing money from a bank. Loans from a family member. A parent, sibling, or close friend may be a smart option for borrowing money.

Enjoy Seamless Application Process Through Integra Credit

Title loans provide access to the equity a borrower has in their in a vehicle's while still maintaining ownership. They have pros and cons, and as with any loan, borrowers should consider all of their options. If you need funds fast and are looking for an alternative option to a title loan, contact Integra Credit today to get started.

Recent Posts

How Does Credit Card Interest Work?

The importance of your credit score can't be overstated. Lenders, employers, apartment landlords, and retailers use your credit score to determine eligibility. A high credit score can open many doors and serve your financial needs for several years. One way to potentially establish or improve your credit score is by using a secured or unsecured credit card. And if you have a credit card, you must understand how credit card interest works. Let's take a closer look at how credit card interest works.

Read More >
How to Cash a Check without an ID

Since the end of the 17th century, checks have been commonplace in Western civilization. While innovative digital payments — such as peer-to-peer (P2P) payments and digital wallets — have dominated the financial scene over the last decade, physical checks are still in use. If you've recently received a check, you may want to convert this paper IOU into cash. However, not having acceptable identification can make it difficult. Fortunately, we've outlined what you need to know about cashing a check without an ID.

Read More >
Debits vs Credits in Accounting

If you've read the most basic accounting book, you've likely heard of debits and credits. While the terms may be familiar, they take on an entirely new meeting in accounting. For example, when you slide your bank debit card, you remove money from your account. In this instance, debits decrease your asset account balance. On the other hand, if the bank makes an error or decides to reverse fees charged to your account, they will issue you a credit. In personal finance, a credit would increase the balance in your asset account. However, it's almost the exact opposite when it comes to accounting. Let's take a closer look at the debit vs credit in accounting.

Read More >

Apply Quickly & Securely

Apply Quickly
& Securely

Fast, short and
secure application
Instant approval
Choose how much
cash you need
Money in your account
as early as tomorrow*