Quick loans guaranteed through a vehicle title are specially designed to favor people who need to obtain cash easily and quickly, either to pay outstanding debts or to meet emergency or unforeseen expenses.
But what makes them a good choice? Mainly, that this type of credit -called “fast car loans”- they have a fairly simple application and approval procedure. However, make no mistake! Just because cash-for-car title loans are easy to apply for — and likely to get approved quickly — doesn’t mean applying for them is a good idea, at least not in all cases.
Think that, if you ask for it, you would have to pay high commissions and you could risk losing possession of your vehicle.
If you are at a crossroads and don’t know what to decide, don’t worry! we tell you 3 things you should know about fast car loans.
- 1 #1 You need to own or co-own a vehicle
- 2 #2 You will have to pay high interest rates, in addition to commissions
- 3 #3 If you cannot pay the loan, you are in danger of losing the car!
- 4 Instead of asking for car title loans, what other alternatives do you have?
- 5 Conclusion on car title loans
#1 You need to own or co-own a vehicle
Car title cash loans are small loans offered by banks. To access it, you will have to put your vehicle as collateral, since it is a type of insured or guaranteed loan.
The amount of money you can receive for a fast auto loan varies between $100 and $5,500, but never exceeds 50% of the value of the car. As for the duration of the credit, you should know that the payment term is quite short, usually lasting from 15 days to a month, at most.
Now, although the name of the loan suggests that it only works with private cars, the truth is that it is open for owners of any type of vehicle, including trucks and motorcycles.
Of course: in order to apply for the loan, You must be the owner or co-owner of the property. What does this mean? That you have 100% ownership or that you at least share it in equity with a third party.
Quick question: what is the difference between the fast car loans and the pink slip loans?
Really none! The pink slip loans –title pledges or title pawns, popularly known in Spanish as pink loans– are other denominations used to refer to the fast car loans. The name variation comes from the color of California vehicle titles, which used to be printed on pink-colored paper.
But how does the pink loan work or fast auto loan?
In order to apply for a loan of this type, the lender or financial institution will ask you for the vehicle title, a personal identification with photography and one proof that you are insured. If approved, you will give the title to the lender, who will return it to you once you pay off the loan in full.
Remember: If you fail to repay the loan, the lender could take your vehicle. That is why it is important that you analyze the risks before requesting a guaranteed loan.
#2 You will have to pay high interest rates, in addition to commissions
Car title loans are subject to a high interest rate. The common thing is that the rate remains about 25% of the credit amount, that is, the amount of money that the financial institution has lent you.
Let’s see it in an example. Suppose you take out a secured loan of $2,000 payable in 30 days at an interest rate of 25%, or $500. In this case, you will have to pay $2,500 at the end of the credit plus any other additional commission that the bank applies to you.
How much is that in terms of APR? We would be talking about an APR of 300%, which is one of the highest loan offers available in the financial market. It even exceeds that of credit cards.
Remember: Before applying for a car title loan, ask the lender how much APR you should pay and, if possible, what the total cost of the loan would be. This will allow you to go to several banks to choose the best option.
#3 If you cannot pay the loan, you are in danger of losing the car!
If you get a fast auto loan and -for whatever reason- you are not able to pay the amount owed before the due date, two scenarios can occur:
- The lender offers to convert the loan into a new one. This will add more fees and interest to the amount owed because it is a refinance.
- The lender requests a lien on your vehicle. In case you want to recover it, you will have to pay even more commissions, interest and, of course, the amount owed corresponding to the overdue loan.
Among these alternatives, without a doubt, credit rescheduling would be the best option; but keep in mind that it will not be cheap. For example, if you requested a 30-day loan for $1,000 with a total interest of $250; you will have to pay the interest first and reschedule the $1,000 of principal in a new loan at 25%, that is, you will be obliged to pay another $500 in interest.
This situation can plunge into a cycle of payments and rescheduling that would make it difficult for you to pay off the debt with the lender.
Instead of asking for car title loans, what other alternatives do you have?
The fast car loans they are not the only way to get instant money. There are other options you could try before applying for a secured loan. Let’s see some of them:
Alternative payday loans
Federal credit unions offer Alternative Payday Loans (PALs) ranging from $200 to $1,000. To access them, you have to be a member of the cooperative for at least one month.
What is the advantage of PALs? First, they will give you one to six months to pay a maximum interest rate of 28%. Although it seems like a high rate, it’s still much less than the total APR you’d end up paying on a payday loan, which, in some cases, could be as high as 400%.
Personal loans with a co-applicant
If you know someone with good credit who can help you qualify for a unsecured personal loanask for their support! This person may be listed as a co-applicant reducing the APR set by the lender, since its good credit score minimizes the risk of non-payment.
Cash advance with a credit card
Credit cards not only allow you to make purchases in physical stores or online. They also give you the option to request a cash advance that will be charged to the card just as an expense would. Although you will only have an amount available -corresponding to the balance of your credit card- cash advances can be a fantastic alternative and will allow you to keep your car out of danger.
However, you must take into account that the APR for cash advances is higher than for purchases you make regularly. Some even reach an annual interest rate of 27%. In addition, the card issuer will charge you an extra charge of money for the operation, which is usually around 5% of the loan.
Conclusion on car title loans
Before applying for a car title loan or fast auto loan, study the other financial alternatives offered by the market, since they could reduce the impact that this type of credit has on your assets. If you still go with this option, compare offers to get the lowest APR and ask for a conservative amount that you know you can pay back within the term.
To avoid cases like these, work on your credit score and raise it little by little by improving your financial practices. You might consider doing a monthly budget to control expenses or start saving with the 50/30/20 rule.
By enjoying a good credit score, you will have the opportunity to access much more attractive APRs, as well as credit card offers with no introductory APR or affiliated with points, rewards and miles programs.