You may think that an auto title loan will not impact your credit report. In fact you may be applying for one to help protect your credit report. Did you know, however, that if you have your credit run by multiple loan companies you will be damaging your credit score?
One of the factors that go into your credit score is the frequency in which companies pull your credit history. The credit reporting companies view these inquiries as an attempt to get credit, which in fact can lower your score. So be careful.
In order to minimize these things, do your homework upfront. Find out when and if a company will pull your credit. Make sure they can satisfy your loan request prior to pulling your credit (basically find out if your vehicle qualifies for the loan amount you need).
Call the company and make sure you feel comfortable with their staff. Check that the company is located in the state you reside and make sure they are registered with the Better Business Bureau. The BBB is a guaranteed way of protecting yourself from fraudulence.
Doing your homework upfront can help protect your credit and your vehicle. Do not be afraid to ask questions and make sure you, the consumer, is having all your needs met. If the company offers a contact form on their website – fill it out, address your issues and concerns and see how they respond.
Keep these valuable tips in mind if you are searching for an auto title loan.
Auto Title Loan and Credit Reports
Auto Title Loans – Learn More About Them
There are many financial products related to vehicles. Auto loans and auto leases are the most common ones. But there is a third financial product related to vehicles which is just as useful but half as well known as the previously named ones: auto title loans. An auto title loan is a very versatile type of loan which works very much like a payday loan, with the only difference that it belongs to the secured loan group.
This article focuses on car title loans, it is an explication on their very nature, on what they entail as financial products and on the obligatory requirements for approval.
Car Title Loans
This type of loan is, as stated before on this article, a secured loan. You borrow a sum of money by pledging your car as a security for the loan. The amount of money you can apply for ranges between $601 and $2500 more or less. As you can see, this loan can be compared to a secured form of a payday loan. It is also a short-term loan, usually lasting between 15 and 30 days at most. If you fail to repay it at the end of the loan, you will be able to “roll it over”. If “rolled” over, the interest rate on the loan will accumulate.
The tricky thing about this loan type is that if for some reason you fail to repay it after it has been “flipped” the maximum amount of times (by law, 6 times), you may have your car repossessed. The interest rate on car title loans, just like in payday loans, is very high. Perhaps even higher than on a cash advance loan. The normal rate is about 25%, or a 300% annual rate.
Vehicle title loans are meant to be used only in an emergency, otherwise, if used regularly for common purchases, they constitute a very bad deal for the consumer.
Auto Title Lenders
These are the lenders offering auto title loans. They make an awful high amount of profit from the interest rate they charge on the loan, and sometimes will do anything to entice you to apply for one of their loans. They will focus on bad credit and elderly people. If you are going through a rough patch and you are in need of money, applying for a title loan involving your car probably will not be the best idea. Try and find other sources of finance because in the end, the interest rate will end up eating up for debt, and you will not benefit from this at all.
Often, these lenders call themselves 601 lenders. Why is that? Because they can only charge high interest rates if the loan is above $600.
Vehicle Title Loan Requirements
Qualifying for this type of loan is very easy. It might be a bit harder than qualifying for a cash advance loan, but easy nonetheless. The first and most important requirement is a car. You must be a car owner (which must be free from liens against it) and be in possession of the title. You must also be employed and be an American citizen with at least 6 months of residence in your current home.
Auto Title Loans – Why You Should Read the Legal Disclosures Section
Subprime loans are tailor-made for consumers who have a low credit score and do not have access to conventional, low-interest debt instruments. Borrowers who are in need of emergency cash and can’t get a loan because of a bad credit can overcome this obstacle by applying for subprime loans, such as auto title loans.
Consumer advocate groups recommend you fully understand the terms of the agreement before taking on any subprime financing product. Because most likely you’ll have to pay higher interest rates and more financing fees than if you choose conventional financing products. The increased rates are necessary because of the risk of lending to borrowers with bad credit is much higher.
Auto equity lenders have to back up their loan. They often have higher interest rates and but the loan is really secured by the borrowers automobile title. The lender will hold the borrowers title as collateral. That way if the borrower is unable to repay the debt, the lender can recover their losses, by repossessing the vehicle and selling it.
This is why most auto equity loan lenders, will only give you up to 50 percent of the vehicles value, that way they can sell the car, to recover the losses from the unpaid debt. Repossession is the ultimate penalty. But most lenders will attempt to contact you and collect the payment before it goes as far as repossession because most often it can cost the lender a lot more to repossess and sell the vehicle than the actual cost of the original loan.
If you are thinking about applying for auto title loans, some state laws, like those in Oregon, make it illegal for the lenders to take a duplicate set of keys. But in cases when the lender has to repossess the vehicle and does not have keys, the lender can get a new set of keys cut using the key code found on the title slip that you proved when you applied for the loan. Some lenders will even require you install a GPS system so they can find the vehicle in case they need to repossess it.
Consumer credit groups suggest you need to know what you will be responsible for up front so you can plan your repayments accordingly. For your own protection, you should always read the legal disclosures section of a lending agreement. This is the section that outlines all fees and charges that may be levied against you, as well as the interest rate, expressed as an annual percentage rate or APR.
The fees outlined in your agreement may vary depending on the lender you choose, but there are some common fees for auto title loans. Oregon, New Mexico, California, and Arizona lenders usually include these terms:
* Insurance: Some lenders will require you to pay a one-time fee for collision insurance.
* Repossession fees: Should you default on your payments and force the lenders to repossess your car, they may charge you a repossession fee. In order to get the car back, you must pay this fee.
* Collection fees: If you make a late payment, some lenders will charge you for the cost they incur from sending you a notice of the late payment or dispatching a representative to collect in person.
* Late fee: This is calculated as a percentage of the monthly payment.
Once you have an idea of the fees in the agreement, ask questions and, if necessary, consult a lawyer to comprehend what you will be getting yourself into. Understand what you will be required to pay and when. Also make sure that you have the right to take legal action, should that be necessary.
Understand your rights as a consumer, including your right to negotiate the interest rates you will be paying the lender. Do a little research and go through the agreement with a fine tooth comb to understand all the implications of your debt before you sign on the dotted line.