Car title loans have emerged as a very popular form of lending for those who do not have the desire or option to borrow from a convectional lender likethe bank or credit union. Lenders that offer these types of short-term loans can be found online as well as their storefront locations.To apply for acar title loan, also called an auto title loan, is easy in most cases. The applicant can apply on line or in store it requires a minimal amount of information including the applicant’s contact information, employment status and monthly income amount. It is compulsory, often times, for the borrower to have a checking account with direct deposit of the paycheck as that is how the lender receives loan payments from the borrower.
Loan amounts can range from $100-$5,000 it depends on the state the borrower lives in (most states independently put caps on how much a lender can loan) and the value of the car or truck. The borrower is required to hand over the title or “pink slip” to the car as collateral for the loan. When the borrower is unable to repay the loan; the lender has the right to repossess the car or truck.One of the attractive features of getting a car title loan, besides the ease and amount in which they are given, is that an applicant’s credit score is not part of the loan process. Meaning, the lender will not run your credit history when determining if or not to give approval for a loan. This is why the consumers with poor, little or no credit at all find these types the car tile loans so appealing.
Because credit history is not considered during application, it is not a part of the repayment process also. Normally, when you take out loan in the form of a mortgage, car loan or credit card, your payment history goes on file with the three credit bureaus. How responsible you are with repaying the loan determines you credit score. If you pay late or in default you credit score will be affected negatively and you may be considered high-risk for future borrowing. When you pay timely and in the required amount, your credit score benefits and you are seen as being loan worthy. The higher your credit score gets, the more purchasing power you gain.
Some consumers take out a credit card or personal loan on purpose for the sake of building their credit score or creating one if they haven’t had credit before. Keeping a small balance with payments that realistically fit the budget is the best way to deal with loan. Taking out a car title loan for the purpose of building you credit is not only futile, since car title loan lenders don’t report to credit bureaus, but can put you in a compromising position financially as they carry very high interest rates and loan fees. Car title loans can be considered a secure form of credit in that you are using your car as collateral.