Risks and Benefits of Auto Title Loans

Car title loans have become very popular in recent years. But let’s make a small compilation of what a car title loan is.

In case you still don’t know, these types of loans are normally used by people in need of quick money.

The car title is used as insurance on the loan and serves as collateral for the lender. It is not a long-term financial solution, but they have the benefit of not having penalties in repayment and that can be paid before the stipulated date.

When they approve a loan like that, they make sure that your income can support the loan itself.

They determine how big is the budget you have, so that you get the money you want and pay it in the future.

Now that you know briefly how auto title loans work, let’s take a look at their benefits and risks.


For people with poor credit

Auto title loans are a good option for people with poor credit history or do not even have credit, who are in need of acquiring fast money.

If your credit is bad, you have applied to traditional banking for a loan, you have been denied the application and have shown no interest in helping you.

What is your next option? Then use the equity you have in your car to get a car title loan.

Using this, you will have the money you are requesting and you will be able to continue using your car, only for the company to add its name to the title of the car until you finish paying your debt.

So if you have bad credit, don’t worry! Your car represents the credit for the lender and its value will be given by the conditions of your car.

So it is the best option you can find if your credit is bad or if you have no credit history.

Instant money

If you are in a situation where you need fast money, then the interest rate should not be important but get cash.

Having this money in due can help you with your financial problems. So a car title loan does not seem as risky as it sounds if you know your ability to pay it monthly after obtaining a benefit.

As long as you are able to repay the loan, there is no risk at all. Just by knowing the level of your income, you will be guided to the path of instant money.

Simple application

As long as there is equity in your car and you own the title, the title pawn company will be able to help you get the loan you need and you can usually get it until the same day you made the application.

Since their approvals are not based on your credit history, only the value of your vehicle and your long-term payment capacity are taken into account.

Better than a payday

Auto title loans are much more efficient than payday loans. With the first you can get a couple thousand dollars, while with the second you will get a couple hundred. And you have to consider that auto title loans are much more accessible than payday loans.

We have already seen the most immediate benefits of auto title loans. Now we will see the other side of the coin, just so you have the full picture.


Interest rate

The interest rate on a car title loan is usually much higher than on traditional loans.

If it is a great way to get a couple of thousands of dollars you need immediately, but you need to be aware of interest rates that will entail.

It is important that you know how you will make your payments in case at any time you cannot handle it. If this happens, interest rates would rise significantly.

And if you still cannot repay the debt, your car will have risks of being taken by the company and you will have to pay the release of your car, in addition to the interest and payments due in order to recover it.


Of course, it is the biggest consequence of not being able to pay the car registration loan. Let the company repossess your car. If you make your payments on time and have contacted the office you have nothing to worry about.

But if you are unable to make your monthly payments and do not communicate with the company, it is very likely that they will repossess your car.

And the worst thing that can happen to you if you don’t pay the release, is that your car can be sold or auctioned to get the loan money.

Companies that charge extra interest

You have to make sure that the company you chose is well established in the title loan industry.

Because there are many companies that do not usually have much experience and will try to charge you with extra charges to make it more difficult to pay your loan.

To avoid this, work with a reputable company with positive reviews

Finding Great Auto Loans

Buying a car on credit is an important decision for your credit score, since it is one of the ones that most affect you, for better or worse, for the amount you will request.

That is why in this article we will tell you how to identify that the product you will choose is good, which will also benefit your pocket.

1. No commission for opening

Many auto loans offer this benefit, which is very good, since this commission usually takes away the opportunity to give you a good down payment.

Always check that the lender offers you this or that this charge does not exceed 5 percent of the total value of the vehicle.

2. Free insurance

Having 12 months of free insurance will help you save for the next year, when you do have to pay for that expense. In addition, it will make you more liquid during that period.

Just keep in mind that, if your credit is for more than one year, the financial institution that granted it to you will charge you, in the remaining monthly installments, the auto insurance, which will be contracted with an insurer with which they have an agreement, so you will not be able to choose

3. Low rates

As in all loans, the automaker has an annual interest rate that you must pay, so, when comparing, this item is very important.

The rates for these types of credits average 15 percent just like car registration loans so look for one below or equal to that percentage.

4. No penalties

Do not forget to make sure that the institution that offers you the credit does not charge penalties for payments or early settlement on the vehicle registration loans, as this can reduce the interest you would pay.

A credit that penalizes you for this type of action, regardless of the period you should wait to perform them, should be immediately discarded.

5. Research and read the contract

Automotive credit can be granted by banks, self-financing, among many other lenders, so you must investigate who will grant it and if it is reliable.

In addition, reviewing your contract in detail will prevent you from taking surprises with commissions that were not mentioned in the beginning, but that do appear in it.

These two things will help you protect yourself from any fraud and acquire a credit that affects your long-term finances.

Did you like the article? Is there anything else that indicates that a car loan is good and that we have not mentioned? Share your comments!