Your car can be used to borrow money and this is where car title loans come in. Unlike credit cards which are unsecured, getting a personal loan with a car would require you giving up the title to your lender till you are able to pay back. Collateral is something which helps you in guaranteeing a loan and gives your lender something to work within a case you are unable to pay back.
Understanding Title Loans
Title loans are a lot like payday loans but you can get a significantly higher amount of money. These loans are usually given out by finance company and they tend to charge a high rate of interest. These interests are usually covered by the state law and companies tend to go as high as 100% annual rate on the said loans. There are risks however involved in taking these loans such as the rates and the fact you can lose your car at any given moment.
When applying for this type of loan, you are required to have the right insurance. People with basic insurance cannot access this form of loan because it covers damages done to another car in an accident instead of yours. For those with proper insurance, you would be needed to call and list your lender as a beneficiary as well.
You would also be required to hand over the title of your car. The title loan company would then sign the title as a lien holder, that means if you can't pay up in time, you lose the legal right to your vehicle.
The type of loan determines if you would pay in monthly installments and which payment schedule would fit your loan term. Once you finally repay your loan, the lender will lift the lien and the car will go back to having the title of your car again.
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