What You Should Know About Title Loans
Posted on: 25 September 2020
Are you in need of cash and considering a title loan in order to get it? If so, it helps to know more about this type of loan.
What's a Title Loan?
Any loan that involves the title to an item you own is considered a title loan, and the title can belong to an item such as a boat, motorcycle, car, trailer, or RV. When you go to a lender looking for a loan, you are essentially using the title as the collateral so that there is less risk to the lender. The hope is that the collateral will make the lender more likely to give you the money they need, since the lender has something they can collect if you default on the loan.
Many people do not realize that getting a loan for a vehicle or home is essentially a title loan, and the terms can be very similar. The difference is that you are typically using a title loan for a shorter period of time, and the interest rates may be a bit higher
Do Interest Rates Vary?
Any type of loan that you take out is going to have an interest rate, which is how much you pay in order to borrow the money that you need. However, understand that interest rates can vary greatly, depending on which lender that you get a title loan from. Your local community bank may have completely different rates than what your local pawn shop is offering for a title loan, and your credit history can also have an impact on how much you pay in interest for the loan.
When Is It Best to Get a Title Loan?
If you have existing debts that you have at a very high-interest rate, it may be worth using a title loan to pay off that debt for a lower interest rate. That is because your unsecured debts will likely be higher than a debt you are securing with the title for your vehicle. By trading one debt for the other, you'll end up saving a bit of money over time as you work towards paying off that debt.
You can also use a title loan as a form of debt consolidation. For example, if you use that title loan to pay off multiple debts so that you now only have a single loan, you are essentially consolidating them all. This can help make your debts easier to manage over time.
For more information about auto title loans, speak with a local lender.
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