What can you do if you need cash now because you have insufficient savings and your family and friends can’t help? You could get a side hustle or sell some of your stuff, but that may take too long or may not be enough cash to fulfill your needs.
What’s another option? Getting a loan, but that could be tough if you have bad credit or are unemployed and cannot provide proof of income. What’s your next move? If all of the above fail, you could consider a car title loan. Let’s look at how such loans work and if they are right for you.
Car Title Loans Explained
Car title loans are secured loans that use your car title as collateral. Fail to pay back the loan, and the lender will keep your car title and take your car. How much can you expect to receive for this risky move? A loan that ranges from $100 to $10,000.
The amount of your loan depends on how much your car is worth. The lender will give your vehicle a value when you apply for the loan. They will then offer you a loan based on the percentage of the car’s value. If you choose to accept it, you can walk out with the cash within an hour in most cases. From there, the responsibility to repay the loan will fall solely on your shoulders, knowing that if you don’t, you could lose your only mode of transportation.
The Downsides To Car Title Loans
While you may feel relieved that your car title loan resulted in $100 to $10,000 cash to fix your current financial situation, stress could soon enter the picture once you figure out how you’ll have to repay it.
There are two standard options for repaying car title loans. You can opt for installments, which are monthly payments spread over three to six months with an average APR of 259 percent. Or you can opt for a single-payment car title loan, which has you repay the cash with a single lump sum within 30 days. Choose this option, and you could be looking at an APR as high as 300 percent, on average.
Such high APRs plus fees could put you in a worse financial situation than when you started. Add the risk of losing your vehicle if you cannot make payments, and you may realize that you want to stay as far away from car title loans as possible. What are your other options? Let’s have a look.
Alternatives To Car Title Loans
If you cannot get a loan from friends and family, ask your employer if they can give you an advance on your paycheck. If not, try an app like Earnin, which offers advances. Other options include payday alternative loans from a credit union, or installment loans via lenders like LendingPoint, OneMain Financial, Universal Credit, Upstart, Oportun, and Upgrade. Lastly, you can avoid a car title loan by dialing 211 on your phone and asking if any local nonprofits or assistance programs can help.
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