Want to get a loan, but worried about your credit score holding you back? The good news is that you can use your car title as collateral to get a loan! 🚗 💰
This type of loan is known as a car title loan. Title loans have high interest rates and short repayment periods, but they can be a good alternative when you can't qualify for other lending options because of a poor credit score.
However, because your car serves as collateral for the loan, it could be repossessed by the lender if you fail to keep up with payments.
Here's a quick overview of how a title loan works:
- You fill out an application online or in person. You'll need to provide some basic documents like proof of income, a valid government-issued ID, and of course, a clean title to your car (meaning you own the car and it's never been declared a "total loss" after an accident).
- A lender will assess your vehicle to determine its value and make sure it works. You won't get a loan for a car that doesn't run! 🙅
- Once your vehicle has been inspected, you can get a loan worth between 25% - 50% of the value of your car.
- The lender will hold onto your car title until your loan is paid off. You'll usually need to pay back your loan in 30 days. In the meantime, you can drive your car like you normally would for work, errands, or anything else you need to do.
- After you pay off your loan, the lender will give your title back.
While this is definitely a convenient way to get needed cash, don't forget that the lender can take away your car (and keep it) if you default on your loan. You'll be left without a way to get around. That's why it's always better to consider other bad credit loans before you go with a title loan.