JoshSometimes, people find themselves cash-strapped with a significant expense just around the corner. Debt might seem the only plausible solution when borrowing from friends or relatives is no longer feasible. However, there are various types of debt options available for borrowers.
Among the many types of loans, title loans have gained popularity. These are specific types of secured loans with several unique characteristics. While some perceive these loans as riskier than others, they can potentially provide the necessary funds a person might need. Here are five factors to consider before applying for a title loan.
Interest Rates
The average annual percentage rate for car title loans is around 300%. This implies that if the loan period extends over one year, the cost of a car title loan in fees and interest alone could triple the amount initially borrowed.
While these loans are generally designed to last only a month, the steep interest rates often make it unaffordable for most borrowers to repay their debt within that time frame. Consequently, they opt to defer their debt to the subsequent month. Regrettably, this usually results in the imposition of additional fees and interest on top of the initial charges when the loan was first obtained.
Look for Expertise Specific to Title Loans
Veteran title loan providers will possess the appropriate knowledge, tools, and determination to upgrade their services to align with customer expectations constantly. By opting for a seasoned title loan provider, you’ll benefit from a service that’s customized to your specific needs.
In addition, long-standing title loan providers are often well-equipped with sufficient staff, so you won’t have to endure long waits for your requests to be handled. If you’re worried about having bad credit while facing emergency expenses, you can get bad credit loans with guaranteed approval from the best bad credit lenders.
Payment Plans
Before securing a title loan, understand the lender’s repayment plan – whether they expect direct payments or deductions from your paycheck. Furthermore, you should ascertain the duration of your title loan.
Similar to other loans, an extended repayment period means smaller monthly payments. However, the downside is that you’ll incur higher finance charges each month. Strive to keep your loan outstanding for the minimal possible duration.
Repayment Penalties
For auto title loans, there might be instances where clearing your loan in advance could be counterproductive. If your loan agreement extends beyond 30 days, there’s a high possibility that an early repayment penalty is included. This indicates that if you unexpectedly have access to additional funds and choose to clear your loan earlier than scheduled, you could face a penalty.
Loan providers’ objective is to derive substantial profits from their interactions with you, so they craft their loan plans in a manner that allows them to gather as much interest as possible during the repayment phase. An early settlement implies that you’re avoiding a large sum in interest payments, directly impacting the profit they accrue from the repayment.
Provider’s Reputation
Before choosing a title loan provider, check their credibility by looking at customer feedback. Client reviews can offer crucial information about the company’s advantages and disadvantages. While a few negative comments are normal, repeated issues like high interest rates or subpar customer service should act as a warning sign, prompting you to explore other options.
When assessing a title loan provider’s standing, don’t forget to visit independent review platforms too. Providers may only showcase the most positive feedback on their own websites, but impartial review sites can give a more balanced perspective of the provider’s service quality.
Endnote
If you’re considering securing a car title loan, research can be immensely beneficial. As you analyze your choices, the previously mentioned suggestions can aid you in obtaining a loan that will swiftly meet your cash needs while reducing financial hassles.