Content of the material
- Title Loans and Interest Rates
- What You Need to Qualify for a Title Loan
- About TitleMax®
- Title Loans Pros And Cons (mostly cons)
- No Credit Check
- Fast Approval and Access to Funds
- Inflated Interests and Fees
- Potential Debt Trap
- Losing an Asset is Easy
- Short Repayment Terms
- Other Methods Of Paying Off Title Loans
- Pay Off The Balance Early
- Negotiate Loan Terms
- Try Debt Management
- A Financial Experts Opinion
- Refinance or Consolidate
- Problems with title loans
- Title loans are expensive
- Title loans can lead to a cycle of debt
- Your car is at risk of being repossessed
- Possible Alternatives to Payday and Car Title Loans
- What To Know About Car Title Loans
- Lets Summarize
Title Loans and Interest Rates
When you research car title loans online, their high interest rates are often mentioned. These high rates often make people wonder how to pay off a title loan fast, because the longer it takes to pay off the loan, the more you end up paying. By applying for a car title loan with TitleMax®, you could prevent high interest rates because our rates are competitive to other title lenders. We work with our customers to establish a comfortable, manageable repayment plan. If you want to pay off a title loan early, you can do so without penalty. Other companies sometimes charge a fee for this, but not TitleMax®. In fact, we encourage early repayment of your loan and don’t charge an extra fee to do so. If you’re currently stuck in a car title loan with a high interest rate, consider contacting us. We might be able to refinance your loan and give you a lower interest rate. The application process is easy. You can fill out an application online, or you can visit one of our 1,000+ locations. Use our online store locator to find a TitleMax® in your area.
What You Need to Qualify for a Title Loan
Wondering how to pay off a title loan fast is good, but before you can do this, you must be approved for the loan. The main requirement for approval of a car title loan with TitleMax® is that you own a car that’s paid off. You must hold the lien-free title to the car. The title must have your name on it as the owner. It doesn’t matter what the make, year, and model of the car is. You will also need a regular source of income and a government-issued ID. Income can be from your job, pension, unemployment, or disability payments. When you apply for a car title loan, your car will get appraised. We do this to get an idea of the value of your car and how much you can borrow. If you want a rough estimate of your car’s value, look up the value of your car on the Kelley Blue Book website. We loan you the funds while we hold onto your car title as collateral. We return your car title to you after you make your final payment. The good thing about an auto title loan is that nothing really changes; you can continue to drive your car as normal, and as long as you make the scheduled payments, you can get your title back™ after repayment of the loan. We conveniently accept cash payments and payments through Western Union.
TitleMax® has been in business since 1998. We are proud of the quality customer service we provide and have locations throughout 16 states. However, if you can’t stop by one of our locations, you can always call our toll-free number or use the live-chat function on our website. Our approval process is fast. After you apply, we can let you know how much you can borrow within as little as 5 minutes, and you can have the cash you need in as little as 30 minutes.
Whether you’re dealing with a medical emergency, doing your Christmas shopping, or maybe trying to reduce financial stress that you’ve been under, a car title loan from TitleMax® could quickly help you out. Our repayment plan is doable, and if you come into some extra money, you can always pay off the title loan early without an extra fee. If you have poor credit and need money in a hurry, a title loan from TitleMax® could be the way to go.
Title Loans Pros And Cons (mostly cons)
It’s essential to review a title loan’s pros and cons before taking one out because it can help you discover whether it is the best option for you.
No Credit Check
Most of these title loan lenders don’t check your credit score. This aspect is exceptional if you want a loan, but you have bad credit that doesn’t meet traditional loan requirements or have exhausted all available credit unions.
Fast Approval and Access to Funds
Lenders will only take a couple of minutes to review the application, assess your vehicle, and ultimately approve the loan. You can access the funds almost instantly or after a few days following loan approval.
Inflated Interests and Fees
Title loans’ annual percentage rate can be as high as 300% due to finance charges, interest rates, and other hidden fees. These excessive charges can further hurt your financial obligations.
Potential Debt Trap
According to CFPB, over 50% of auto title loans become problems to debtors. Simply put, debtors will continue to request new loans to reimburse the previous ones. These loans are dangerous and harmful as they can get you into debt cycles that you can’t evade easily.
Losing an Asset is Easy
Title loans can put you in dreadful situations. For example, you can lose your vehicle if you fail to repay the loan. Thus, you need to pay the loan on time to avoid the prospective burdens included in these loans.
Short Repayment Terms
These loans often require you to repay within 15 to 30 days. Compared to traditional loan repayment terms that range between six months and three years based on how much one borrows, it’s evident that title loans offer short repayment terms.
This short repayment period may not give you sufficient time to search for the funds to repay the loan. Worst, consider the high APR.
Other Methods Of Paying Off Title Loans
If you already have an automobile title loan, here are the methods to incorporate for fast repayment:
Pay Off The Balance Early
Try paying off the loan as quickly as possible if you happen to get the money early. Working overtime, asking for help from a friend, borrowing money from family, or working on a temporary job can help you repay the loan and prevent vehicle repossessing.
You can take another loan to refund the title loan. Having good credit scores lets you qualify for loans with better fees, interest rates, and no collateral needed.
Negotiate Loan Terms
While the lender might not offer room for loan term negotiations, it doesn’t cost you anything to inquire. Consider asking for a low APR and an affordable payment plan that fit your demands and have the agreement in writing.
Try Debt Management
A nonprofit agency can contact your lenders and get you a plan that suits your budget if you require any assistance in your overall debt situation.
A Financial Experts Opinion
As you have seen above, you will have undesirable consequences if you fail to repay your loan on time or disregard it altogether. Also, some shady online lenders hit customers with high-interest rates, penalties, and other hidden fees even if they pay the loan on time and abide by the rules.
It is no secret that avoiding title loans is the best option. However, if you already have an existing title loan, it would be wise to ensure it’s your last. You have worked smart to develop an incredible credit score and create an emergency savings account.
So, don’t let title loans destroy all of these benefits. You can see plenty of safe options you can use to get a loan exists, as described in this post.
Refinance or Consolidate
Another way to get rid of your title loan is to replace it with a different loan. This doesn’t solve the main problem (that you’re short on cash), but it can stop the bleeding. A fixed-rate loan from a bank, credit union, or online lender is often less expensive than rolling your title loan over month after month. Even a convenience check from a credit card can reduce your costs—as long as you are certain you’ll pay it off before any promotions end. Paying off the title loan also allows you to get your title back.
If you’re having trouble getting approved for a better loan, visit local banks and credit unions, where you have a better chance of qualifying. Online peer-to-peer lenders are also worth a look. If all else fails, somebody close to you might be willing to co-sign and help you get approved. Just make sure they understand and are willing and able to take on the risk of paying off the loan in the event you don't.
Problems with title loans
While title loans may seem like a good idea when you need a short-term loan, they have serious drawbacks.
Title loans are expensive
Title loans cost a lot — typically coming with interest at an annual percentage rate, or APR, of around 300%. That breaks down to an average 25% in interest charges per month. For example, if you borrow $1,000 with monthly interest (also referred to as a monthly fee) of 25%, you would need to repay $1,250 at the end of 30 days — and that figure doesn’t include any additional fees you’ll probably have to pay.
So these short-term loans are expensive — but the problem gets worse.
Title loans can lead to a cycle of debt
If you’re not able to make the full loan payment at the end of the loan term, the lender may offer to renew or roll over the loan into a new loan. This new loan again adds more fees and interest to the amount you already owe.
Let’s say you borrowed $1,000 with a 25% fee, but at the end of 30 days you could only pay back $250 rather than the full amount of $1,250. If your lender offers you a rollover loan, the $1,000 that you still owe would be rolled into a new loan with additional interest and fees.
Assuming the same rate, at the end of the next 30 days you’d owe $1,250. If you pay back the loan in full at the end of this loan, you will have paid $500 to borrow $1,000 for 60 days. (And again, this doesn’t include fees you’ll be charged.)
Unfortunately, borrowers on average pay more in interest and fees than the amount they borrow. The average title loan is $1,000, and the average fees paid per customer per year are $1,200, according to a 2015 report from the Pew Charitable Trusts.
With costs piling up each month, borrowers who can’t afford to pay the loan in full could face another challenge.
Your car is at risk of being repossessed
If you’re unable to make your full loan payment at the end of the loan term, you risk losing your car. A study from the Consumer Finance Protection Bureau found that, for people who have to roll over their title loans, one out of every five loans end with the car being repossessed.
Even if you’ve been making partial payments, if you can’t keep up with payments as laid out in your loan agreement, the lender is allowed to repossess your car.
Possible Alternatives to Payday and Car Title Loans
Here are some less expensive and less risky options to payday and car title loans:
- Ask your employer for a paycheck advance. Your employer may be willing to give you money you’ve already earned but haven’t been paid. For example, if you’ve worked seven days but your next scheduled paycheck isn’t due for another five days, your employer might be able to pay you for the seven days. This is not a loan. It will be deducted from your next paycheck.
- Ask your creditors for more timeto repay them. They may be willing to work with you. If they offer an extension on your bills, find out if they’ll charge you for that service — through a late charge, an additional finance charge, or a higher interest rate.
- Try to get a loan from a credit union. Credit unions typically offer lower interest rates than banks or other lenders, and some federal credit unions offer “payday alternative loans,” or “PALs,” for small loans. PAL loans are much less expensive than payday or car title loans. Some state-chartered credit unions offer loans similar to PAL loans.
- Visit a community bank. Local banks can offer smaller loans with easier repayment terms than large regional and national banks. Talk with a small bank in your area to find out if you can qualify for a loan.
- Use your tax refund. If you think you might have a tax refund coming, file as soon as you can. The IRS says it usually issues refunds in 21 days or less if you file electronically. Ask the IRS to direct deposit your refund into your bank account.
- Get help managing debt. A credit counselor may be able to help you manage your debt. Non-profit groups in every state offer credit guidance to people for no or low cost. You may want to check with your employer, credit union, or housing authority for no- or low-cost credit counseling programs, too.
- Ask family and friends for help. It can be hard to borrow money from family or friends, but it can be worth it to avoid taking out, or rolling over, a payday or title loan.
- Local charities and churches. Charities, churches, and other centers of worship often offer financial and other help at no cost to community members who are hitting a rough spot. It’s what they do, and it’s okay to ask for help.
What To Know About Car Title Loans
Car title loans, often just called title loans, also are short-term loans. They typically last 15 or 30 days. The loans use your car, truck, motorcycle, or other vehicle as collateral. They’re usually for amounts ranging from 25% to 50% of the vehicle’s value.
To get a car title loan, you must give the lender the title to your vehicle. Usually, you need to own the vehicle free and clear, but some lenders will take your title if you’ve paid off most of your vehicle loan. The lender will want to see the vehicle, a photo ID, and proof of insurance. Many lenders also want a duplicate set of keys for the vehicle.
If you get the title loan, you won’t get your vehicle title back until you repay the amount you borrowed, plus the lender’s finance charge and any other fees.
Car title loans are expensive. Title loans usually have an average monthly finance fee of 25%, which translates to an APR of about 300%. Title lenders often add other charges to the loan amount, like processing, document, and loan origination fees. You also may have to buy add-ons, like a roadside service plan. If you have to pay added fees and buy add-ons, the cost of your loan will be higher.
Here’s how a typical car title loan works:
- You want to borrow $1,000 for 30 days.
- The finance fee is 25%. That means that you have to pay $250 to borrow $1,000.
- You give the lender the title to your car, and the lender gives you $1,000 in cash.
- When it’s time to repay the lender in 30 days, you must pay $1,250, plus any other fees the lender charges.
Costs increase with rollovers. Like with payday loans, if you can’t repay a title loan when it’s due, the lender may let you roll it over into a new loan. But rolling over the loan will add more interest and fees to the amount you owe.
Here’s how a typical title loan rollover works:
- Using the example above, on the original due date you don’t pay but instead roll over the 30-day, $1,000 loan for another 30 days. The rollover will add another $250 in finance fees, plus any other fees, to the amount you owe.
- That $250 is added to the $1,250, you already owe, so now you owe $1,500, plus any other fees that the lender may charge for the rollover.
- The rollover brings your cost of borrowing $1,000 for 60 days to at least $500.
You can lose your vehicle. If you can’t repay the money you owe, the lender may repossess your vehicle, even if you’ve been making partial payments. When you get the loan, some lenders insist on installing Global Positioning System (GPS) and starter interrupt devices so that they can locate the vehicle and disable its ignition system remotely, making repossession easier.
Once the lender repossesses your vehicle, they can sell it, leaving you without transportation. In some states, lenders can keep all the money they get from selling the vehicle, even if they get more than you owe.
Car title loans are a way to get cash in a hurry using your vehicle as collateral. Car title loans are risky because their short loan terms and high APRs make them difficult to pay back. This increases your risk of repossession. If you're in a title loan, you should try to pay it off if it’s at all possible. You can do this with an unsecured personal loan, a credit card cash advance, help from your family or employer, or refinancing. You can also try to negotiate with the lender or seek assistance from an accredited credit counseling agency or attorney. The bottom line is that it's better to be out of a car title loan than in one.