If you’re in need of cash and think you might need a title loan? Read on to see and understand what title loans are and how they work.
They are appealing because of their fast processing times meaning you can get money quickly. But you should think carefully before taking out a title loan — they can come with high-interest rates, which makes them expensive.
What is a Title Loan?
A title loan is a type of loan that you secure with the title to your car. Typically, you receive a few hundred dollars and agree to pay it back in full—along with interest and fees—in two weeks to a month.
Title loans can be appealing because they usually don’t require a credit check, the application process can take as little as 15 to 45 minutes, and you can continue to drive your car. But beware — they can mean trouble for borrowers.
How do Title Loans work?
When applying for one, the lender will assess the value of your car. Then offer a loan based on how much they believe it’s worth. (Usually, you’ll get 25 to 50 percent of its assessed value.) A typical title loan will be due in two weeks to a month, at which point you’ll have to pay back the loan—as well as interest and fees—in its entirety.
Are Title Loans legal?
Believe it or not, title loans are legal in the following states: Alabama, Arizona, California, Delaware, Florida, Georgia, Idaho, Illinois, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Mexico, Ohio, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wisconsin.
However, because they’re so risky, a number of states have banned them.
Before you consider a title loan designed to trap you in debt or claim your car, consider borrowing money from friends or family, cutting back on unnecessary expenses, or taking out a legitimate personal installment loan.