What do you Need to Know when Applying for a Car Title Loan?
A car title loan is a secured loan where a person can use his or her vehicle as collateral against the loan. A car title loan can be a good loan option for someone who has bad credit or bankrupt or in a consumer proposal. Car title loans are also good options for those who do not have a steady income, such as people who are self-employed, those who work on commission and people who are on pension or disability.
However, there are a few things that you need to know before you apply for a car title loan.
Your Car Must be Paid Off in Full
A car title loan uses your car title as collateral. Therefore, you must own your car title. If you still have payments to make on your vehicle, then the car’s title is still held by the bank or financing company and you won’t be able to use it to get a car title loan.
You Must have Car Insurance
In order to get a car title loan, your vehicle must be insured.
Car Equity May Depend on the Wholesale Value of the Vehicle
In many cases, the amount of the loan that you will be able to get will be based on the wholesale value of your vehicle. This means that higher value vehicles and vehicles that are in better condition will likely be able to get you a larger loan amount.
The Loan Not Only Depends on the Car’s Value
However, the value of the vehicle is not the only aspect that is used to determine the amount of the loan. Several other factors are considered as well. These factors include the cost of monthly insurance, the debt-to-income ratio of the person applying for the loan and the monthly cash flow of the applicant. All of these factors will be considered by the lender and used to figure out what size of a loan you will be able to get.
Your Car Must be in Good Standing
Your car cannot have any other loans taken out against it or any other money owing on it for any other reason.
Ownership must be under the Borrower’s Name
The car title needs to be in your name in order for you to use it as collateral for a loan. You are not able to use a vehicle that is under someone else’s name for a car title loan, even if you are the primary driver of the vehicle. It has to be your car.
Once the loan has been repaid, the car title is returned to the owner. You are able to continue driving the vehicle while you are paying for the loan and you do not lose access to the car as long as you keep up your loan payments.