When someone needs emergency funding, there are options in the financial marketplace that could provide that kind of financial support. Depending on the loan type and the lender, a credit check may be required.
For those that have varying degrees of credit, they could be denied approval for a loan. So where do people turn?
Fortunately, emergency funding may be available to those that need it, regardless of their current credit score. One of these types of emergency funding options are title loans.
A title loan is a secured loan that uses collateral. The borrowers qualifying car title is given to the lender as collateral until the loan is repaid. For most title loans, the loan amount given to a qualified borrower is based on the value of their vehicle via the Kelley Blue Book (KBB).
Many people compare a title loan to how a payday loan works, but they are quite different. Here are a few differences between the two:
Looking at the differences between the two, it is easy to understand how vastly different these two types of emergency funding are. But what are some of the advantages that title loans offer? Here are a few:
- Quick Emergency Funding: The purpose of a title loan is to help people receive emergency funding quickly and simply. Therefore, title loans are preferable, especially if time is a factor.
- Online, Over the Phone, In-Person: Many title loan lenders have taken their services completely digital. Lenders could help people apply for emergency funding over the phone, or even in-person by visiting a store.
- Open Most Days: Some title loan lenders are open late on weekends, which means those who may need emergency funding late into the day could still receive help, if they qualify.
- Availability: More than 20 states allow title loans in their jurisdiction. Title loans are available in most major cities. From title loans in San Francisco to title loans in Houston, presence for title loans are huge. Both online and in-person.
One drawback includes the consequence of defaulting on a title loan. Depending on the state, the lender could be allowed to repossess the vehicle if a person fails to pay off the loan or keep up on their monthly payments.
Some title loan lenders give their potential borrowers high interest rates on their loan. However, most regulated title loan lenders in many states have allowed for zero prepayment penalties, as well as eliminating balloon payments.
Why do people get title loans?
There could be several scenarios as to why someone would want to obtain a title loan. Like most emergency funding options, title loans allow people to regain financial stability and pay off debt. Here are a few reasons why people chose to obtain a title loan:
- Costly medical bills that need immediate payment.
- Property damages that need immediate repair.
- Lawsuits and tickets that need to be paid.
- Refinancing for a loan.
- Paying off a debt or bill.
Many of these situations may have led people to obtaining personal loans like title loans. But what are the full requirements for a title loan, and how does someone know if a title loan is right for them?
How could someone get a title loan?
Although there are some varying requirements that must be met by lenders in the title loan industry, here are just a few documents that lenders may ask for when determining qualification for a title loan:
- Government-issued I.D. (driver’s license, state I.D., Social Security card, etc.)
- Proof of residence (utility bill, doctor bill, bank statement, homeowner’s insurance policy, etc.)
- Proof of income (pay stubs, bank statement, last year’s federal tax return, etc.)
- The cars title in your name
When a potential borrower provides these documents to a title loan lender, an appraisal is then performed on the vehicle to determine the loan amount that will be given.
If someone is deciding to obtain a title loan, they should research and compare title loan lenders within their area to determine which one offers a better deal or terms.
As a form of emergency funding, a title loan is a great option for borrowers in need of quick monetary funds. Once a loan offer is received, be sure to go over the terms very carefully and stay up-to-date on payments.
