Car title loans offer borrowers the ability to borrow money in exchange for the car’s title as collateral. It is a short-term loan that can help many borrowers through a difficult financial time. An auto title loan is processed much faster than more traditional loans from banks and credit unions. Because they are processed so quickly, these types of loans are favored in emergency situations. There are several questions related to car title loans, one of those being related to insurance. Does a borrower have to have insurance on the vehicle that is being used as collateral for a car title loan?
The answer to that question, in most cases, is yes. A car title loan is unique in that the borrower still retains the ability to use the vehicle while repaying the loan. Since the borrower will be driving the vehicle, there is the possibility of an accident. If the borrower is in an accident, the value of the vehicle will be significantly less if it has been involved in an accident.
Lenders like Embassy Loans of Florida will require that a vehicle used for a title loan to be insured. If a vehicle is not insured prior to the loan process, borrowers can purchase a collision waiver debt cancellation addendum. This is included in the monthly payment. Most legitimate lenders will require a vehicle to be insured before granting a title loan. Companies that are less reputable may often not require insurance.
Another factor that plays a role is laws of the individual states. Most states will require an individual to have car insurance in order to operate a vehicle. What is necessary as far as coverage is dependent upon each individual state.
At Embassy Loans, an applicant will be asked to present several forms of documentation in order to process the loan. Along with items like a driver’s license and a utility bill to prove residency, a borrower must have the title to the vehicle and proof of insurance. Without it, Embassy Loans will require the purchase of the collision waiver debt cancellation addendum or the loan cannot be processed.
If you are considering a title loan to help you in a time of financial need, be wary of title loan companies that do not require insurance. Most lenders will require insurance coverage. Some may not because of state laws. If that is the case, make sure to do your research and find out exactly why a title loan company does not require you to have car insurance.