The short answer is yes – and no. Car title loans can destroy someone’s financial future just as a conventional loan can. Car title loans can also help promote a healthy financial picture for those who use them wisely. Here’s a look at how a car title loan can promote or destroy someone’s financial standing.
The Basics Of A Car Title Loan
Car owners who have paid off their loan balance or who have almost paid it off can borrow against the car’s title. The vehicle secures the loan, meaning that if the borrower defaults on the loan, then the lender can take possession of the vehicle. Many lenders do not require the vehicle to be completely paid off and most car title loans are in the range of $1,000 to $5,000.
Loans can be obtained from a variety of title loan companies such as Embassy Loans in Florida. The process to obtain the loan is easy, and most loans are completed in an hour. Since a vehicle serves as collateral, there is no need for credit background checks. These, and other background checks and verifications, typically hold up the processing of conventional loans.
Car Title Loans – The Bad
Whether it is a car title loan, a car loan, or a mortgage payment, if you choose not to repay it you are going to have problems. With a car title loan, when the borrower decides not to repay, the lender can take possession of the vehicle and then sell it to recover some of the losses. As a borrower, there is the possibility that you can lose your car. Defaulting on the loan will also do more damage to your credit history. This is true for any loan.
Car Title Loans – The Good
Making your car title loan payments on time positively reflects on your credit report. Paying it off on time, or even ahead of schedule, is also beneficial for a borrower’s credit. A solid payment history makes up the biggest portion of a person’s credit score. By not missing payments and paying off your debt, you impact your credit history in a positive fashion. The same is true for a car loan, a mortgage, or even a credit card.
Like any debt payment if handled properly, taking out a car title loan can be a benefit. You get money when you need it and repaying the loan improves your credit history and your overall financial picture. Handled incorrectly, a car title loan, like any other loan, can lead to financial catastrophe.