Title loans can be a great tool for car owners to borrow money fast. If you own your car outright and have a lien-free title, you can use the title to get a loan within the same day. But since they involve putting down the car title as collateral, some car owners can be hesitant — especially with so many myths floating around. Here are five misconceptions about auto title loans that may make borrowers hesitant, along with several truths about title loans.
1. Title loans are too risky
Title loans are incorrectly thought of as unnecessarily risky. But there are a few bad apples that have unfortunately harmed the reputation of title lenders. Not all title lenders engage in shady practices. Many are perfectly legitimate and willing to give you a fair loan.
As you’d do with any lender, make sure to do your research to find a good title lender. Look for high ratings and positive online reviews on websites like Trustpilot. Also, check out the lender’s Better Business Bureau page to see its BBB rating and any complaints it received.
2. Title loans can’t get you a lot of money
Some think you can’t get much from a title loan, making it hard to cover larger emergencies. But luckily, title loans are based on 25% to 50% of your vehicle’s value. That means you could get a substantial amount if you own a valuable car. Plus, you can go to multiple lenders and see if one offers a larger amount for the same car.
3. You have to leave your car with the lender
It would be highly inconvenient if you had to temporarily give up your car just to get a loan. Title lenders understand this, so most don’t require you to leave your vehicle with them. You may have to leave a copy of your key or title with the lender, but not the car itself. After the lender has given you a loan offer and you accept it, you can drive off in your car with cash in hand.
4. Title loan interest rates are too high
Many people believe title loans have very high interest rates. But title loans are secured by a significant piece of collateral — the vehicle — so many title lenders will give you an interest rate lower than other types of short-term loans. This rate will be spelled out in the loan agreement. Still, if you aren’t sure you can afford the loan, shop around with several lenders and compare.
5. It’s hard to get title loans
Title loans are actually some of the easiest loans to get, since you’ll be providing your car as collateral. The lender will appraise the car’s value, ask for your proof of income and other necessary information, then give you an offer based on the vehicle’s value. You can walk out with your loan the same day you apply. You can even apply for a title loan online, streamlining the process more.
The bottom line
Title loans have unfortunately been subject to many myths. The truth is, title loans can be a quick and convenient borrowing option if you own your car outright with a lien-free title. They aren’t as risky as people say if you research for legitimate lenders, and you can get a substantial sum of money depending on your vehicle’s value.
Rates can be lower than other short-term loan options, too. Better yet, you can get funds the same day you apply and continue driving your vehicle while the loan’s outstanding. So, if you have a lien-free title, own your car outright, and need cash fast, a title loan might be worth considering.