It was in the 1990s that car title loans first emerged in the financial world, opening up a brand new market to individuals who may not have otherwise had access to borrowing money. A car title loan is a form of secured loan where a borrower offers the title to his or her vehicle as collateral. The title loan company places a lien on the borrower’s title in exchange for a loan amount. When you then repay the loan, the lien is removed, and the title returns to the borrower.
How Is a Title Loan Obtained?
Borrowers will seek the services of a title loan company like Embassy Loans. They will fill out an application and then must submit some documentation as part of the loan process. Embassy Loans will need to verify a person’s identity, residency, and see that the title and the vehicle have matching VIN numbers. Once verified, Embassy Loans moves on to the next step – appraisal.
How Much Can Be Borrowed?
Embassy Loans uses current blue book values to determine the value of a vehicle. Typically, lenders will allow a borrower up to 50 percent of the value of the car or truck. This limit is to protect the lender. If a borrower were to default on the loan, the lender can take possession of the vehicle and sell it to try and recoup the losses. It is much easier to make up those losses when less than 50 percent of the value was loaned out.
Why Car Title Loans Became Popular
As lending increased throughout the 1990s and into the early 2000s, there was not a market for those with poor credit ratings. Alternative loans like car title loans were the response to this need. Individuals with bad credit but who own a car, now have a way to access cash when they need it. Embassy Loans offers borrowers the ability to go through the entire loan process online. In many cases, a car title loan can be processed in as little as an hour. Because of the lack of credit checks and other paperwork, processing an auto title loan takes much less time than a traditional loan from a bank.
The Future of Car Title Loans
Car title loans still represent an easy way for those who own vehicles to borrow money when they need it. Whether it is an emergency expense or a job layoff, car title loans are a big part of today’s lending market and will continue to be in the future.