Borrowing money against your vehicle is certainly a good option when you’re cash-strapped fail to secure a loan through any credit union or bank.
You may take it up as a predatory loan since the lenders often provide you with a loan amount that you find tough to repay in time.
Apart from the initiation and documentation, you’ll also need to take the processing fees and interest rates into account while considering loans against your car. You may end up paying an amount worth up to $100 in total.
#1 Car Title Loans
Car title loans aren’t tough to achieve as these loans are secured against your car.
For such loans, you don’t need to undergo any credit checks but submit your car title. Once you submit your application, you’ll need just a couple of days to see the funds in your bank account.
In order to avoid bearing any rollover interest, you’ll need to repay your title loan within a month. In case you don’t pay the entire loan amount back within the due date, it triggers a rollover.
In this case, you’ll need to bear the interest alongside paying a portion of the principle amount. For instance, if you borrowed an amount of $1,000 with an interest rate worth 9%, then you may consider paying $90 in place of $1,090.
But you’ll need to pay $1,090 during the following month. This way, you’ll end up paying much more than what you borrowed initially.
2 How Much Can You Borrow?
The lender informs you on how much you can borrow. You may borrow up to 60 percent of the value of your car, but many of these lenders will only issue loans up to 50 percent of the vehicle value.
You don’t need to borrow the maximum value of your car. It’s in your own interest to borrow an amount that absolutely necessary.
Repaying a bigger amount might seem to be an uphill task, especially when you take the interest rate into account.
3 Online Lenders
You’ll need to furnish your insurance, vehicle and personal information while applying for your car title loan over the internet.
Your car title and keys have to be submitted to a nearby office or you may get the entire process completed over the internet. With some online lenders, you may see the funds in your account within an hour or so.
A large section of borrowers aren’t able to repay their loan amount in 30 days; according to latest industry surveys, a borrower often ends up getting his car repossessed or repaying the entire amount in about 8 months.
You’re bound to pay more in terms of interest if you need more time to pay the loan back. It becomes more challenging for a borrower when he needs more time.
You may need to bear a yearly rate of 108% in interest if you sign up for a monthly rate worth 9%.
Your car will get repossessed in case your loan remains unpaid for over a period. To make things worse, if your car gets sold for any amount lower than your loan value, you’ll then need to repay the difference between the amount owed and the selling price.