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.
