Applying for Auto Pawn Loans Online

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January 27, 2012

All you need is a clear title when applying for auto pawn loans online and the process is relatively simple and easy. However, make sure that the lender you decide to do business with has a secure website. You will be transmitting sensitive personal information that you don't want to fall into the wrong hands.

How to Apply

Once you have investigated various auto pawn lender websites and have determined that the one where you wish to apply is secure, the entire process should take only a few minutes to complete. You'll need a few documents like your personal state-issued identification and a clear title to the car you are using to obtain an auto pawn loan. The application process online will help speed up the process and once completed, instructions will be made available how to contact the lender to arrange for a vehicle inspection, handing over the title document and receiving your cash. The entire process should be completed within a few hours.

How it Works

Almost everyone is familiar with how a pawn shop works. Lenders make money available for a short period of time using personal items as collateral until repayment is made. Typically, the cash lent against the value of an item is less than 50% and possibly much less. Also, the principal lent carries a fairly high interest charge that becomes part of the repayment amount that once satisfied will release the personal item that acts as collateral. If the consumer defaults on repayment, the lender can, and usually does, resell the item to recoup losses. Since the money lent is a fraction of the item's value, possible resale not only helps recoup the loan amount but offers the lender an opportunity to make a considerable profit.

Drive Away

When your automobile is used as a collateral item for a short-term loan, you get to drive away with the cash in your hand. Unlike the jewelry, guns or electronics sitting at the pawnbroker's shop waiting to be reclaimed, there are no parking lots full of vehicles waiting for their owners to return, repay and reclaim them.

Title Sits with Lender

Auto pawn lenders will retain your clear title document to the vehicle as collateral for the loan allowing you to make use of the car. This is the advantage of obtaining an auto pawn loan as opposed to other types of pawn loans. But, since this is a much higher risk for the lender to take, much higher interest rates are charged. Yet, as high as the interest rate might appear for an auto pawn loan, they can be much more reasonable than many charged for unsecured loans.

Cash Loan Is a Small Percentage

But, although your automobile might be worth thousands of dollars, most auto pawn lenders will only issue loans for a fraction of the car's value. Also, age and type of vehicle play determining factors deciding the loan amount. Most lenders will make cash loans for 35% to 50% of the vehicle value. This assures the lender that in the event a consumer does default on the loan, there is enough "equity" available to not only recoup the loan amount, but for the lender to make a tidy profit.

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