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A bad credit score can make it almost impossible to borrow money. You may be at the higher end of the pay scale, but your sub-par credit score can still get in the way. So, what are you supposed to do when you need extra cash for an emergency?
Borrowing from friends and family is rarely a great idea, even when they have cash to spare. Instead, a better option is often poor credit title loans. So what’s a poor credit title loan? To help better guide and inform you, here’s a look at what you should know about this type of loan and why it may be a great option.
A Quick Look at Poor Credit Title Loans
Okay, so you’re interested in applying for a title loan but aren’t sure what it is. A bad or poor credit title loan is a way to get cash when your credit score is something you’d rather not discuss. What’s a poor or bad credit score? A credit score below 580 is considered poor.
Since lenders are rarely excited about approving loans for anyone with a sub-par credit score, this makes it difficult to get cash to cover emergencies. This is when a title loan comes in handy.
A title loan doesn’t care about your credit score. That’s right, no one is going to check your credit history when you apply for a title loan. What type of title do you need? Automobile titles are the most common, think of cars and trucks. However, some title loan companies also accept motorcycles, RVs, and even boats as collateral.
You can typically borrow anywhere from 25% to 50% of the vehicle’s value. If you have no clue what your vehicle is worth, check the Kelley Blue Book for reference. This is probably what the title loan company will use to determine your vehicle’s value.
How to Apply for a Bad Credit Title Loan
Before you can do anything, you’ll need to find a lender—but don’t worry; this isn’t going to be an issue unless it’s illegal in your state.
If it’s illegal in your state to use a vehicle title to secure a loan, you may want to research some other options. If it’s legal, figure out if you want to apply online or in person. Either option produces the same fast results. You should find out if your loan application is approved within a few minutes.
If you apply online, the funds are typically sent to the provided account. In-person means you walk out with either a check or cash.
You will need to provide some documentation. This typically includes a valid driver’s license, proof of residence, and the vehicle’s title. Some title loan offices may also request bank statements and pay stubs. You’ll hand the vehicle title over to the loan company.
Don’t worry though; you get the title back once the loan is repaid. Something to note about the vehicle title. The title must be solely in your name. The vehicle can’t have either a co-signer or joint owner.
You also need to own the vehicle free and clear. This means there can’t be any liens and this includes anything you may still be paying off. For example, if you’re still making payments on the vehicle, you can’t use it as collateral for a title loan.
Some title loan companies also ask for references. You may even need to have a GPS actively tracking your vehicle. If you’re not sure what you need for a title loan, check with the company. Most post their requirements on their websites. If you can’t find any information, it may be best to look for another title loan company.
Repaying a Title Loan
You have a few options on how you repay a title loan. You can pay the loan off in one lump sum, and this is usually the best option.
Also, be prepared for high interest rates; the interest on a title loan typically runs around 25% and it quickly adds up. If you drag out the payments over a few months, you can end up paying well over two or three times the original loan amount.
Most title loan offices offer a few payment options. You can often choose to pay weekly, twice a month, or every four weeks. If you decide to pay once or twice a month, the payments are generally a little higher than going the weekly route. This is often due to accumulated interest.
Whenever possible, try to pay off a title loan as quickly as you can. This can end up saving you a significant amount in interest.
Refinancing your original loan may be an option. While rarely recommended, interest rates tend to rise, it’s a better option than losing your vehicle. Don’t forget, if you don’t repay the loan the title company has every right to repossess your vehicle. When it comes to making payments, you can usually do it online or in person.
Know Your State and Federal Regulations
Before borrowing money from a title loan office it’s a good idea to know state and federal regulations. The Truth in Lending Act (TILA) is a federal regulation that requires title loan companies to disclose all terms and conditions. This includes all finance charges and the APR (annual percentage rate). In other words, the lender must let you know the total cost of the loan and can’t tack on any surprise charges.
When it comes to state laws, these vary so it’s best to check with your local government regulations. Some states have caps on interest rates, while others limit loan amounts. The term of your title loan may also be restricted under state guidelines. Even when and how a title loan company can repossess your vehicle is often strictly regulated at the state level.
You Can Get a Title Loan with Poor Credit
Poor credit can be a significant obstacle when trying to obtain financing from traditional lenders, but alternatives like title loans exist for such financial situations. Title loan companies typically do not consider your credit history, focusing instead on the value of your vehicle, which serves as collateral for the loan. You could get approved swiftly, often within minutes.
However, before you proceed with a title loan, it’s crucial to familiarize yourself with the relevant state laws that govern title lending, as these can vary significantly and impact the terms and legality of the loan.
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