Myths & Misconceptions About Title Loans
Just like any industry, you’re bound to come across dozens of myths and unknowns that people bring up about a business. Some of these misconceptions aren’t at all true and some don’t make any sense. There’s always confusion when you discuss financial options and different lending and finance terms. But it’s important to find out what’s really going to happen with a vehicle pink slip loan. Here are the most common myths we hear about car title loans.
Myth #1: You need to hand over your keys when you take out a loan.
This myth has been around for years and in the past it used to have some validity. A few decades ago, the only companies who provided car equity loans were pawn shops. Much like you would expect to happen if you pawned a guitar or diamond ring, you had to hand over your vehicle as collateral. These days, financing arraignments where you hand over both the pink slip and keys are rare. Most online lenders will gladly settle for only the pink slip. They know you need a vehicle to get around and drive to work. After all, how could you get to an office or place of business if you don’t have a vehicle? We know of a few pawn shops and even some title loan companies who still need borrowers to hand over the vehicle as collateral. Many of these services are marketed in pawn shops. The others are online lenders who work with high risk borrowers. As there are many financing options available today, we recommend staying away from these services. Work with a title loan service who lets you keep the keys to your car!
Myth #2: The fees are often the same no matter which company you work with.
Car title loan companies are similar to mortgage companies and even traditional banks and credit unions. Many of these service providers are looking for new business and new loans to write. That means there’s a lot of competition for business. But they’re not going to automatically give you a low rate or good term if you don’t ask! Take a mortgage provider as an example. The competition in this industry is very high. We know customers shop around for the best rates and finance amounts. So a bank or mortgage lender will be proactive in providing the lowest rate possible. Compare that to what you see with vehicle title loans. Many of these companies are giving out the industry standard rates. Most consumers fail to shop around for lower interest amounts because they believe there’s no flexibility. Take Premier Title Loans as an example when looking to improve contract terms. Even with this site, you should definitely ask your customer service rep if there is any way they can lower the total amount of fees and charges. Consider the amount of money a car title loan lender losses out on if they pass on a consumer for whatever reason. Now, think about how many more applicants they can bring in the door by lowering the rates on their secured loans by a small amount. Don’t hesitate to ask your lender if they can lower the rates or make the financing terms more favorable. It never hurts to ask as the worst thing they can do is say no!
Myth #3: You will always pay a huge amount of money in interest when you take out a loan.
It’s true that a car title loan often comes with a huge APR. If you look at the loan agreement or fine print of any lender finance contract you’ll see an interest rate that could approach 100%. On paper this is a huge amount of money. It will end up being a large sum if a borrower took out the loan and didn’t pay off the loan early. That’s why it’s critical to look at a car equity loan more than a short term emergency fix. Let’s say someone takes out a title loan that’s payable over 2 years. When you factor in the APR over 24 months it will be an incredible number. Even after 30 days the amount will be high, but that’s where you need to cap it at. Treat a car title loan as a short term obligation by paying it off as quickly as you can. Instead of paying finance charges month or month you need to do whatever it takes to pay it off in weeks instead of months or years. Contact your title lender before you take out the loan. Confirm with them that you won’t be subject to a prepayment penalty if you pay off the online loan amount early. By doing this you can get out from under the high APR loan obligation and the creditor will get the money back which they lent out.
Myth #4: You can’t qualify for a title loan with bad credit or no credit history.
Walk into a bank or credit union and ask for a mortgage equity loan or personal loan. The first thing the banker asks will probably be something about your credit score. They’ll want to know what your FICO score is and if you have any past due debts or loans. Getting a credit card or even an installment loan is next to impossible if you have poor credit. It’s a complete opposite when you apply for a secured car title loan. When you use your car as collateral for a loan, you tell the lender the car is theirs if you default or can’t fulfill your contractual obligation. We’ve discussed the negatives which come with this type of secured loan many times and it’s definitely risky. On the flip side, you can qualify for car title loans with almost any type of bad credit. The title loan company wants to know how much collateral you bring to the table in the form of your vehicle. The more equity that’s available in your car the higher amount of cash you can borrow with pink slip financing. Most lenders know they can repossess and sell your car if things go bad as a way to recoup the initial investment. Someone needs to weigh the two different scenarios. Do I need a short term loan so bad that I’m willing to use my auto as collateral for the online title loan? Or can I qualify for another type of unsecured loan where I don’t need to hand over my pink slip?
Take Time To Determine If You Really Need To Borrow Money
Jessica has blogged about the title loan industry since 2012. Before that she managed a team of customer service representatives for one of the largest payday loan companies in the US. Since coming to Premier Title Loans she’s overseen our sales and marketing department and looks forward to educating consumers on their different financing options. Jessica is always open to feedback and questions that relate to short term loans!