In today’s lending world, credit history and credit score are everything. Some people will shy away from a car title loan believing that it may damage their credit. But, can a car title loan hurt your credit rating? Any damage that might occur depends on the borrower. First, it helps to understand how a car title works.
What Is A Car Title Loan?
A car title loan is a short-term loan where a borrower uses the title to a vehicle as collateral in exchange for a loan. Embassy Loans is a well-known title loan company that has helped tens of thousands of individuals access much-needed cash using their cars or trucks as collateral.
How Do You Obtain a Car Title Loan?
The process is pretty simple. An interested party fills out an application to begin the process. At Embassy Loans, applications can be completed in person or online. Applicants will have to submit certain forms of documentation to prove their identity and that they do indeed own the car used as collateral. Once verified, the lender can appraise the borrower’s car for value and the final loan agreement is drafted. The entire process can take as little as an hour.
What about Credit?
Since you effectively base a car title loan on collateral, there is no need to check a borrower’s credit history. The process is therefore rather quick. Unlike traditional loans from a bank, there is not a lot of paperwork involved, as the lender doesn’t base the loan on the borrower’s credit history or score. This swiftness is one of the advantages of a car title loan. Individuals who may have a less than worthy credit history can still borrow money.
Can the Loan Hurt Your Credit?
Once the lender completes the loan and a borrower receives the money, he or she will have the terms of the loan agreement and must meet them to avoid any repercussions. A car title loan, as with any loan, will damage your credit score if you fail to repay it. If you do default on the loan, Embassy Loans does have the right to take possession of your vehicle. If repossession did occur, the vehicle would be sold to try and recover some or all of the losses incurred.
Repossessions rarely occur on car title loans. In fact, most borrowers repay their car title loans, which has a positive effect on credit. Making payments on time and paying off a debt positively impacts a credit history positively.