Auto Title Loans: How To Save Money On Them
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Many of us often take out auto title loans by keeping their vehicle title in the form of a collateral. These short-term loans are also known in different names such as title, pink slip, or car title loan. However, these loans often turn out to be quite expensive and difficult to afford within a set budget. There are ways to save on auto title loans and there are certain alternatives to these credit products as well. Let us first get a basic idea on how these loans work.
Auto Title Loans: How Do They Work?
If you take out a car title loan from a lender, they usually put a lien on your vehicle title. In addition, you have to submit the printed document of the title for a short period in lieu of the loan. As soon as you pay off the loan, the lien is taken off and you get the vehicle title back from the lender. If you fail to pay off the amount, then the lender has the legal right to reclaim your car, sell it off and use the sales proceeds to get the balance due. The repayment time is normally 1 month/30 days.
This type of finance is usually offered for a small term and normally comes with higher rates of interest in comparison to other forms of credit. This is a convenient borrowing option for borrowers since they don’t have to undergo any credit check for getting this amount. If the vehicle that you own is in good condition, you will qualify for it. Self-employed individuals and people who filed bankruptcy are also eligible for them.
Why do auto title loans become troublesome?
On certain occasions, repayment of this type of credit becomes a tedious task due to the following reasons:
- § Interest rates are incredibly high, and the APR can often be as high as 100% per year
- § Lenders don’t usually evaluate the repayment capacity of the borrowers since there is no credit or employment verification
- § The repayment term is small so there is a risk of default
- § The amount offered against the value of the car is often too low
- § Payment defaults can often cause the interest rate and fees to skyrocket
- § You have the risk of losing your vehicle in the event of a default
How to save on your auto title loan
If you think that the present lender is charging an outrageous interest rate on your title finance, then you have the option of refinancing it with a lower rate and save money. With the right use of refinance, you can save as much as 50% on your interest expenses. The rate of refinance will depend on the amount that has been offered, which may begin at 2.1% on a monthly basis. So, refinancing often proves to be a useful technique to reduce your monthly payments on your auto title loan. If you search thoroughly, you will find many competitive and affordable refinance quotes from various lenders.
Is there any alternative to auto title loans?
Of course, there are alternatives. Some of them have been listed below:
- § Credit cards
- § Payment extensions
- § Borrowing from friends or family members
- § Emergency loan from your workplace
- § Going for a payday loan
- § Getting a personal loan from your bank
- § Using other precious articles that you don’t need so much
Obviously, using a credit card, payday loan, personal loan, or getting a loan from your workplace are all subject to comparing the interest rates with your auto title finance and the terms and conditions of such credit. At least, you don’t have the risk of losing your vehicle here. Don’t forget to do your homework right.
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Category: Loans
