My First Car Loan

Title loans can provide access to needed credit in situations where more common forms of borrowing are inconvenient or unavailable. Instead of using a credit score to determine loan worthiness, title loans typically require the use of your vehicle as collateral to secure the loan and have specific guidelines and rules that must be followed.

If you are interested in applying for a first title loan, the following information will help you decide if this type of lending vehicle is a good option for your situation.  

1. Title loans require proof of ownership

Title lenders require borrowers to provide proof of ownership of the vehicle they are using for collateral. This is done to determine if there is also a previous loan encumbering the vehicle and to prove that the borrower is the actual legal owner.

In most cases, the vehicle's title will be held with the lender until the loan is repaid in full. Some lenders may also require a set of keys to facilitate recovery of the vehicle, should the borrower be unable to repay the loan and forced to default. 

2. Title loan offers are based on the vehicle's value

Title loans amounts are determined by the lender and are based on their assessment of the vehicle's value. If there is an existing car loan already in place with a bank or auto loan company, the amount of any title loan offer extended to you will likely be smaller than it might have been if no other lender were involved.

While the exact loan offer amount can vary from lender to lender, most title loan offers are somewhere within the range of one-quarter to one-half of the value of the vehicle. As part of determining the value of the vehicle, most title lenders will require you to present the vehicle for an inspection. They will also photograph the car for the loan file. 

3. Title loans are designed for short-term lending

The average title loan lasts for a period of one month or less, on average. While the title loan may be able to be rolled over into a new one or have the repayment terms altered or extended, substantial fees may be required to do so. 

Title loans can be a viable way to raise immediate funds for an emergency situation, but they can be more costly than other forms of borrowing. Borrowers should be certain that they will have access to the funds needed to repay the loan within the agreed upon loan term before applying. 

To learn more about title loans and make a final decision about applying, take time to speak with a reputable title loan company.