A loan is usually the perfect solution out of financial woes. Despite its importance, it is never easy to successfully secure one. There are many hitches in the process of getting a loan and many individuals are not patient to go through the strenuous process.
This is the main reason auto title loans exist. In the present day, auto loans can be procured in physical offices and online sites. The process of procurement is quite straightforward which makes it a popular choice for many people.
So, what exactly is an auto title loan? An auto title loan is a type of loan which enable borrowers use their auto title as collateral. The loan can be used as an emergency fund for purchase of Christmas gifts, repair of equipment and payment of tuition.
Basically, the vehicle title of the borrower is withheld until they have money to pay back the loan. Itemized below are five tips to help you choose the appropriate title loan.
1. Ensure you peruse every detail
You should make sure that you carry out your due diligence before settling for any loan agreement. If there are any grey areas, you should ensure that you ask your lender necessary questions. The interest rate payable should be clear.
You should also know the repercussions of missing a payment and available options to you if you miss a payment. You should also know how soon your title will be returned to you after the loan repayment.
2. You should know the Annual Interest rate
The average lender charges about 25% for title loans monthly. At first look, this doesn’t look bad but you might be wrong. You should understand the concept of Annual percentage rate (APR). A title loan whose monthly interest is 25% equates to a 300% APR.
This implies that a borrowed capital of $2,000 would mean a repayment of $8,000 (principal of $2000 plus $6,000 interest). It is therefore imperative to choose the lowest interest rate available.
3. Ensure there is no repayment penalty
In most cases, paying off one’s loan early is a bad idea. This is because most companies attach an early repayment penalty to their agreement. This implies that if you pay off your loan before its due date, you will be penalized.
4. Understand the verification and approval process
Some financial institutions carry out their application process online, while others carry out physical verifications that will take more time. The process can take as less as 20 minutes or as much as 3 days. Understanding the process will save you a lot of time. Read more here about a quick title loan company.
5. Don’t exceed your limits
Try to borrow funds that you are capable of paying back. Inability to pay back loans will only pile up your debt in form of late fees and interest. You should consider your income and scrutinize your budget before you consider taking an auto title loan.