When To Consider A Title Loan

Need cash now to get you through a temporary financial shortfall? There are many different options that may be available to you, but for those who own a vehicle, a title loan often makes the most sense.

In California, there are many strict regulations on the car title loan industry. For example, you can only take out a title loan if you borrow $2,500 or more. This is to protect consumers from risking their car for only small sums of cash. And there are other protections as well – so it’s not an unregulated industry like some seem to portray it.

Your Car Is Your Piggy Bank

Many people rent and have no equity in a home. Home equity loans may be a good option, therefore, to some – but not even a possibility to all. And it can be difficult to consistently keep up a large savings account or an investment account when things are tight and you’re living from paycheck to paycheck.

But when you get a title loan in California, what are you really doing? You are using the equity you have in your vehicle. That may be the biggest investment you have made financially, and your car may still be worth several thousand to tens of thousands of dollars. Why not tap into the funds you have already invested in your car to help you over a financial hurdle?

In essence, your car is your piggy bank. Now, many lenders will require you own your car title free and clear in order to get a title loan. But some allow you to take out a loan based on equity in your car even when you don’t fully own it yet.

How Do Title Loans Work?

Another benefit of title loans is the ease and simplicity with which they can be taken out. Most lenders allow you to apply online, and it may take only half an hour to go through the whole process. You will need your car title handy, and you will have to fill out a few short forms. That’s about it.

In most cases, the loan would be between $2,500 and $10,000, though larger loans are possible on very valuable vehicles. As mentioned above, California doesn’t permit title loans smaller then $2,500 to legally exist within the state. The full amount may be due in 30 days’ time, but you can also get title loans that are repaid in regular monthly installments.

You want to make sure you can afford the payments, of course. There are late fees to be avoided, and interest builds when repayment is delayed beyond the deadline. It’s even possible a car could be repossessed due to default on the loan or inability to repay. But lenders don’t really want to go through the hassle of repossessing a vehicle to pay the debt and if you take out a reasonable loan and do all you can to be responsible, the chances of that happening are low.

When Do Title Loans Make Sense?

No one likes to have to take out a loan. But when financing becomes a necessity, there isn’t always time to seek a regular bank loan. Traditional bank loans take too long to process, don’t let you spend the money however you want, and are very uncertain as to approval.

A title loan makes sense if you own your own car but have no significant equity in a house. It makes sense if you need cash fast with as little hassle as possible. If you have bad credit, realize that most title loan lenders do NOT base approval on credit history and may not even run a credit check.

Your car equity is like a piggy bank, and title loans allow you to make use of it. It is possible to get workable terms and use a title loan as a tool to get you through a difficult time. In these situations, such loan can “make sense.”