Use a Car Title for a Personal Loan: Secured Collateral Loans for Fast Cash

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January 27, 2012

Using your car title for a personal loan has become a possible route for those looking for fast cash. With the turbulent economic times that have hit the world, people need loans for various reasons. The banks have pretty much stopped giving out loans unless you have stellar credit, since that is what got them into the mess in the first place. The loans that they do give may have enormous interest rates over the long haul. One viable option are auto title loans. This is a type of secured loan, meaning that it's backed with some sort of collateral or equity. In this case, your car is being used as collateral. These loans are usually good for those with bad credit, because there are no credit checks required. The only thing that you need for a car title loan is - you guessed it - a car. 

How It Works

These special loans are much different than the typical loans you may be used to. A bad credit personal loan is normally not going to be for a very long time, and these are no different. Car title loans normally are for no longer than 30 or 60 days. This means that you need to repay back your loan in a very short time. These loans can be dangerous for that reason exactly.

Just like any other collateral loan, if you default on it, you can have your car taken away. Your lender may be forgiving and extend your loan repayment period, but that comes with a steep increase in the interest rate. When you find a lender, you will want to make sure you ask about how long you have to repay, and what the penalties are (other than losing your car). When you're there, your car will be valued to see how much you can actually borrow. You can usually only borrow about half of the value, because if you do default, the lender wants to make sure that they have enough room to make back what they lent you. The valuation will occur when you meet them, so bring your car, and make sure it looks nice and shiny. The better it looks, the more they will likely allow you to borrow.

Interest Structure

Since the loans are only based on one or two month periods, the interest rate they give you will likely be a monthly rate and not the "APR" or annual rate you're accustomed to. This monthly rate will likely be 20%, which is incredibly high. However, it is the price you may need to pay since they can offer fast cash, and they may be the only lenders that would even offer you money in the first place. Make sure of the rates before you sign, because they can be confusing. As stated before, if you default and get a longer time to pay, your interest rates will likely rise to over double or triple the amounts you were originally paying.

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