The increasing popularity of auto title loans has created some confusion among the general population. Contrary to what some may believe, there are major differences between an auto loan and an auto title loan. While one is used to purchase the vehicle, the other can be used by those who own a car or truck. Here are those differences.
When you want to purchase a car but cannot pay for it all in cash, you can apply for an auto loan to help you with the purchase. To obtain a car loan, you will most likely visit your bank, credit union, or other financial institution. The lender will carefully examine your work history and verify that you have the means with which to repay the loan. Your credit history will also be checked to ensure that you are not a credit risk. If you have a poor history of paying your bills on time, a financial institution will be less willing to loan you money.
Obtaining a car loan will take some time. The lender takes the time to ensure that it is making a good decision in offering the loan. It could take a week or two or, in some cases, a month or more. As a borrower, you can shop different lenders and see what terms they offer. Like buying a pair of shoes, different lenders will offer their own prices, or interest rates, and fees. Auto loans are usually longer-term loans. The typical car loan term is five years.
Auto Title Loans
You cannot qualify for an auto title loan until you actually own a vehicle. In most cases, lenders like Embassy Loans of Florida prefer that the car is paid off entirely. The vehicle then becomes collateral for the loan. Lenders will still offer a title loan to borrowers who have a balance on an existing car loan. A borrower who has $2,000 balance remaining and has a vehicle worth $10,000 or more is still a good candidate for a car title loan.
The process for obtaining an auto title loan is similar but much quicker. Potential borrowers fill out an application and provide documentation to verify their identity and residency. Applicants must present the title to the vehicle. The lender will then assess its value and develop the loan agreement. Borrowers normally have their money within an hour. A car title loan is generally for a much shorter period of time than a car loan. The typical auto title loan is for a period of a few months, though it can be renewed if not paid in full by the end of the term.
Car title loans and car loans differ in many ways. Both have their advantages and disadvantages. Title loans are great for those who need emergency cash and need it quickly. They also work for those who may have poor credit histories. A car loan is used to purchase a vehicle. The repayment terms are different, and the interest rates are much lower than those of title loans.