A title loan is a personal loan secured by the title of an asset, most commonly a vehicle. Title loans generally are higher-risk loans with significant interest charges.
A title loan requires a borrower to be the owner of the title on the vehicle or other asset being used. In this way, the asset is used as collateral for the loan in case the borrower defaults on payment.
Unlike traditional personal loans, title loans have looser credit qualifications and may be readily available to borrowers with a not-so-good credit history. Specifically, they do not require that the applicant’s credit history or credit score be used to determine whether he is qualified for the loan.
Consumers considering a title loan will need to pay close attention to the details of it. These loans may have very high interest rates. Additionally, failure to make payment according to the loan terms may lead to the loss of the vehicle or other asset.
Title loan example
Susan needs to come up with $500 to pay for an emergency home repair, but she cannot obtain a traditional loan because her credit score is too low. Instead, she applies for a car title loan from a local provider. She uses her vehicle’s title as collateral for the loan and receives the funds immediately. She manages to repay the loan over the next month, even though the interest rate was exorbitant and the payments took half her paycheck. When she pays off the title loan, all holds on her vehicle’s title are released.
A personal loan can be a great financial tool. Shop today for the best rates.