Financial institutions, especially these days, prefer secured loans over those that are unsecured. As the name suggests, a secured loan is one that offers an asset as a form of collateral in exchange for the opportunity to borrow money. There are several types of secured loans, mortgages and auto loans being the most popular. There are also lesser-known secured loans, such as car title loans in which a vehicle owner uses his car or truck as collateral for a loan.
A secured loan is usually the best way to obtain a large amount of money. Lenders do not like to loan large amounts of money without some sort of assurance that the money will be repaid. When a home is used as collateral, for instance, it is a pretty safe guarantee that the borrower is going to do everything in his power to repay the loan. If not, the lender can take possession of the home and sell it to try and recover its losses.
An auto loan is much the same as a mortgage in that an asset, a vehicle, is used as collateral. A borrower is much more likely to repay the loan when he or she faces the threat of losing their vehicle. Like mortgage loans and other secured loans, auto loans usually offer lower interest rates, higher limits on the amount that can be borrowed, and longer repayment terms.
While auto loans, mortgage loans, and home equity loans are the more popular types of secured loans, the car title loan is also a type of secured loan. A person who owns a vehicle that has been paid off (or in some cases, nearly paid off) can use the vehicle’s title as collateral for a loan.
At Embassy Loans, one of Florida’s leading consumer finance companies, borrowers can fill out an application to begin the process. They will need documentation to prove their identity and residency and must possess a legal copy of the title. Once the application is complete and everything has been verified, the vehicle is assessed for value.
Title loan companies normally use blue book values for vehicles, and then will usually lend between 30 and 50 percent of that value. In the case that a borrower defaults, this gives the lender a chance to recover most, if not all, of its losses by selling the vehicle.
One of the great things about car title loans is that they are processed very quickly. Most are completed in an hour since there are no lengthy credit checks or other paperwork to slow the process down. As a result, car title loans are becoming more popular.