Pros and Cons of Title Loans

Title loans are one of the best ways for people to borrow money. This is very similar to a secured loan, where the money is borrowed against the title of a property or a vehicle. There are many pros and cons to taking title loans so you will need to ensure that they are the best option for you first before you sign on the dotted line.

The main benefit is that title loans often offer much lower interest rates than other types of loans. This is because the lender is likely to get the money back one way or another, whether you pay the money back or they have to take the property or the vehicle that you have put as collateral. It also means that the home or vehicle cannot be sold until the loan is completely paid off, which helps the lender more.

However, this is the downside to title loans. There are some people who will sell their car or home or even refinance to be able to pay off any money that they owe. There are also people who will want to sell them so that they have more disposable income. Without the title that is not possible.

Car title loans are actually illegal in some of the states of America. This is because even a loan of 1000 dollars on a car that is worth 20,000 dollars could mean that the whole car is taken if the payments are not met. They are often seen as predatory lending and they are usually forced onto the elderly or single parents.

Also the interest rates are not always low. There are some companies that will charge 300 percent for the short term loans; this is so that they get more money and actually has nothing to do with the fact that they are not putting themselves at the high risk as they would with unsecured loans.

What many people do not realize is that car title loans could be considered the same as a payday loan rather than a secured loan. The difference with payday loans is that there is nothing down as collateral so they are considered lower risk lending. Payday loans will charge the high interest rates but if you pay the money back within the first 31 days like you are supposed to, you will stick to a lower amount of interest or just one flat fee; this is not offered with title loans.

Car title loans should only be considered as a last resort and it is important that you check all of the details and the fine print before you take one out. Remember the risks that you are putting yourself under.

There are certain documents that you will need for the title loans. The main one is the title of your property or car. You will also need the proof of you income and the insurance on your vehicle. A utility bill and proof of identity are also usually required.