My First Car Loan

Car title loans are an option when you are in need of cash fast. Before signing an agreement though, it is important that you completely understand your contract. Here are some key areas to pay attention to. 

Fees and Penalties

Just like any other loan, there are fees and penalties associated with a car title loan. However, you might find some that might seem unusual to you. For instance, there could be a repossession fee required if you do not make your payment as agreed. The lender might also require you to add life insurance to your contract. The insurance ensures that the lender is still paid in the event that something happens to you before it can be paid back. 

If you do not understand a fee that is on the contract, ask questions. In most instances, you will never have to worry about the additional expenses. However, you should be clear as to when those fees are applied, if ever. 

Interest

Interest can be confusing in any lending situation. Even though your loan is for a short period of time, interest is still applied. The interest rate you are being charged needs to be written on the agreement in the form of the annual percentage rate. For instance, it should be listed as 7 percent if that is the rate. This allows you to quickly calculate how much is owed so that you can double-check the final rate that is listed by the title loan company. 

If the lender is offering the ability to pay only the interest to extend the loan if you are unable to pay it completely off as agreed, you need to understand if the rate will change. If so, the amount that it changes to should be detailed. 

Expected Payment Date

The date that you are expected to pay back the loan needs to be clearly detailed. If there are additional dates on the agreement, find out what they are. In the event that you are unable to make the full payment when it is due, you need to know whether there is a grace period. If so, the number of days you are allowed should also be included in the agreement. 

As with any other agreement that you are signing, it is important that you carefully read and question it before signing. By knowing what you are signing and understanding the terms, your car title loan experience can be a pleasant one. For more information on car title loans, talk with someone at a business like DRIVEiT Title Loans.