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Car title loans are meant to be short-term loans. They can be used for anything the borrower chooses, but they are primarily designed to cover emergencies or unforeseen bills. They also come in handy when a consumer has nowhere else to turn because of bad credit. However, the one thing you don’t want to do is to rush into a car title loan with the first company you come across. Although there are a number of companies from which to choose, there are some important differences between their loan features, fees, terms and requirements for loan approval.
Company Reputation & Reliability
Make sure you take the time to thoroughly research any title lending company you are considering. You want to look for a reliable company that has been in business for several years and one that provides good customer service. Research the best candidates with the Better Business Bureau. Check out their online reputation by searching out customer reviews, which is a great way to gather additional information.
Acceptable Vehicles for Loans
When looking for an acceptable car title loan, verify the make, model, age and mileage requirements for vehicles with each lender. Each lender may have their own requirements. For example, some lenders allow autos as old as 1995, and some lenders may not accept vehicles with more than 100 thousand miles.
Requirements for Loan Approval
There is very little flexibility when it comes to meeting loan requirements. You either meet the requirements or you don’t. However, some lenders are much easier to qualify with because they have so few requirements. Possible loan requirements for a car title loan could include:
- Proof that you are 18 years of age or older.
- Two or more references.
- Proof of insurance.
- A clear title listing you as the owner of the auto.
- Proof of income.
- A utility bill to verify residency.
- A working vehicle.
- Checking account.
- Acceptable credit rating. The majority of title lenders do not check credit scores but a few do.
Most lenders do not go to extremes when it comes to their loans, but a few lenders may:
- Impound autos. Most lenders simply hold the title to your auto and file a lien against your vehicle during the loan period. You are still allowed to use your vehicle. However, there are a few lenders that actually impound autos for the duration of the loan until you make the final loan payment.
- Ask for a spare set of car keys. You may want to think twice about signing up with a lender, which asks for a spare set of car keys.
- Require the installation of a GPS tracking device. Some lenders use these devices to track your driving activity. They can also be used to disable your auto if you fail to make payments.
Attaching fees to a car title loan is the way lenders make their money. Title lenders vary greatly in the number of fees applied to loans. When shopping for a loan, pay close attention to fees and comparison shop companies carefully. Listed below are a few examples of common fees:
- Late fees. Customers can be charged a late fee even if their payment is only one day late.
- Application or document fees. These are fees charged to process paperwork for the loan.
- Lien fees. Some lenders pass the cost of placing a lien on the auto back to the customer.
- Finance fee. The cost of setting up financing.
- Interest charges. All lenders charge interest on their loans. However, by shopping carefully, you may find a much better rate.
Many lenders offer 30 day repayment terms, and some terms can be significantly longer. If you cannot possibly repay the loan in 30 days, search for another lender with longer terms.
When shopping for a car title loan, look for reputable companies offering loan requirements you can meet, terms you can live with and a written contract specifying your agreement.