A title loan might seem like a great way to get quick cash, but what they won't tell you is the real cost you'll end up paying.
Title loans are an easy way to get fast money. In most cases, you get to do the paperwork online, and you receive the amount you need in one business day. As you secure the loan with your car or motorcycle, you don’t need a good credit score.
As long as you have a job and your vehicle is in excellent condition, you’re most likely to get the money you need. However, this type of loan is expensive, with an APR that can reach 300 percent, depending on the state you live in.
Before asking yourself where to get a title loan, you should make sure you have clear answers to a few critical questions. Let’s take a closer look.
Can I Pay Off The Debt With My Current Income?
If you need more money to cover current expenses, adding monthly payments to the list isn’t going to help your financial situation.
Ask a bankruptcy lawyer to help you set up a payment plan before securing your loan with the vehicle that you use everyday. This way, you know how much you have to pay each month -- useful information that can help you organize your monthly household budget.
80% of the borrowers end up by rolling over their loans because they can’t keep up with the expenses. That’s why it’s wise to agree on an amount that you can afford. This way, you avoid missing payments that can force you to roll over your loan, adding even more interest fees to your current debt.
Can I Find Cheaper Alternatives?
Title loans are cheaper than payday loans, but they’re still a lot more expensive than credit card debts and personal loans.
For every $1,000 you borrow, you get to spend about $1,200 a year just in fees and interest. That's not even including the loan principal. That’s not a small amount to handle, especially when you’re already struggling to pay your current expenses.
Try to find cheaper and more flexible loan alternatives. If you’re considering title loans, your credit score is too low to use your credit card. But, you can try to ask friends or family for help. This way, paying off your debt will require less money.
What Is The Total Amount of The Loan?
When getting a loan, make sure that the lender specifies in the contract the exact amount you have to pay to clear the debt. This way, you know how much the loan is going to cost you in the long run.
Put together the interest and any other fees the lender charges. When you know all the costs, you can compare various offers and choose the most convenient.
Remember that, if you miss payments, the company can repossess your car. In fact, 11 percent of borrowers lose their cars because they can’t pay off their debts. If you need your vehicle, you should pay attention to the agreement you sign.
Is There A Repayment Penalty?
Many lenders charge an additional fee for borrowers who pay the loan before the due date. If you know you could get enough money to pay off your debt in advance, you should look for a lender that doesn’t charge this fee.
Paying off the loan earlier can save you up to a few thousands of dollars depending on the amount you’ve lent. In this context, the lender loses a significant part of the profit. A repayment penalty is the fee they charge to still profit from the deal.
Is My Data Safe on The Lender’s Website?
Most title loan lenders give you the possibility to fill your request online. This way saves time and you’re likely to get the money more quickly.
However, before you start putting your personal information online, you should check if the platform you’re using is secure. Like any other website, your lender’s site can be vulnerable to cyber attacks.
First, check the SSL Certificate -- look at the URL of the website. ‘Https’ means the site is secured. ‘Http’ means that the company didn’t go through a validation process to get a certification. Websites that have a high level of validation show a green address bar, with a green lock icon on the left.
How Badly Do I Need This Money?
You need to evaluate your financial situation before signing a contract.
Half of the people who borrow money using title loans need it to pay their regular bills. In most cases, this temporary solution brings in more debt, getting borrowers into vicious cycles that end up with them losing their cars.
Discuss your financial situation with your providers and see if you can postpone any payment. Getting yourself into more debt isn’t going to solve your financial problems.
A car title loan is a quick method to get money fast, but it’s easy to miss payments if you don’t build a realistic budget and stick to it. Skipping payments puts you at risk, generating more debt and more pressure due to the possibility of losing your car.
If you secure a loan with your vehicle, you should be sure you need that money badly!
The Better Choice
Taking a title loan is a common choice when someone finds themselves in a desperate financial situation. But, it usually only makes the situation worse. There is now a better choice on the market: the Kasasa Loan®. This loan allows you to pay ahead when you have the cash, but take out those extra payments when you need the cash. This flexibility helps you get out of debt more quickly with the confidence of making the financial wise choice. So, before you consider taking out a title loan, see if an institution near you offers the Kasasa Loan.
This post was a guest contribution from Susan Ranford.