Are car title loans bad?
If you are in the market for getting an auto title loan you have probably read articles about the dangers of auto title loans, also known as pink slip loans and vehicle collateral loans. The purpose of this article is to answer the question: Are car title loans bad?
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What does it depend on? It depends on your own unique financial situation. Here’s some clarifying information. First and foremost, a car title loan works by borrowing against the equity in your vehicle. The process can happen very quickly–sometimes as fast as a day or so, or within a couple of days. You can have pretty poor credit, past mortgage foreclosures, a bankruptcy and other issues–because the lender is using the vehicle as collateral. You can learn more here in this article on how car title loans work.
The positives of car title loans:
The positives are as follows:
- Quick money
- You can have poor credit
- Works faster (in almost all cases) that traditional finance
The negatives of car title loans:
- They have high interest rates
- You can lose your car
We should point out the fact that in any type of loan where you put up collateral, you can always lose the asset you are using for collateral. So, you can lose a house to a bank, a business asset to a bank, or you can also lose a car when you get traditional financing. The main downside of an auto title loan is that the interest rates are high. Why are the interest rates high? There are several reasons for this, but without going into too many details the main reason is that car title loan lenders are loaning money on somewhat risky investments. Plus, it can be hard for new companies to enter into the market for competition.
The main negative of an auto title loan is as follows: The longer you keep the loan the more money you end up paying. Unless you can easily afford the interest charges and payments, you should generally use auto title loans as a short term loan for emergencies.
A lot of times people who get a title loan need money for a funeral, medical emergency, car repair, home repair, or something very urgent. These are when auto title loans can be used for quick cash. However, remember. The longer you have the auto title loan the more it will cost (just like any loan). Call us today at 888-539-2065 for more information or fill out the application form on the side of this website!