With different loan variants, when you wish to borrow money, you will find two major types of debts. One is secured, and the other is unsecured. While the money lenders of secured loans require some valuable materials to lend money, on the other hand, an unsecured loan needs not such a deposit of any valuable property.
Indeed, after knowing these two major types of debt, everyone would like to proceed with an unsecured loan. However, if you are going to borrow a title loan, it should be clear that it is ultimately a secured debt. As a result, the moneylender always requires some valuable property and will provide monetary assistance in exchange.
Borrowing this type of loan is always associated with risk factors. Generally, the risk factor is mainly associated with money lenders as they have lent a lump sum amount to a person who does not have financial stability. But in the case of a secured loan lender, the risk factor is entirely upon the borrower as he has deposited his valuable belonging to the moneylender.
Similarly, title loans are also quite risky for borrowers, and for this reason, before borrowing money; he must know everything about it.
What is Title Loan?
When a borrower with a car requires liquid funds, he may visit a lender for the sake of a loan. The moneylender may ask him to transfer the ownership of the car until the completion of the repayment period. This lending of money in car exchange is known as a title loan. A money lender always asks for the borrower’s car while borrowing a title loan.
However, to qualify for borrowing money through a title loan, you must have a car. Even if you do not have a car, you may easily borrow money. As there is no necessity for a car, the moneylender will still offer you the loan if you have any vehicle.
Being a secured and short tenure loan, it comes with a high-interest rate. Besides, if you cannot repay the money within that short period, your vehicle will be taken under the grasp of the moneylender.
Features of Title Loan
Several features of the title loan made it unique from other secured loans. Here the collateral is the leading cause of creating such difference.
For instance, to borrow a secured house loan, one can easily keep his valuable belongings like jewellery, investment papers, properties etc. can save it as a mortgage. However, to borrow a title loan, one needs to maintain a vehicle as to the mortgage.
- Process of application: The process of application is quite simple. One can even apply for such a loan through an online application. On the other hand, there is no necessity to fill up many forms to apply for this loan.
- Tenure: It is a short term loan. As a result, you must repay it within a brief period. Mainly the tenure varies from one moneylender to other. But a borrower must repay the loan within a minimum of 30 days and a maximum of 12 months.
- Rate of interest: While most borrowers like to avoid debts that come with a high rate of interest, you do not have any other option left after borrowing a title loan. Moneylenders of this type of loan usually require a very high-interest rate. Therefore, you must take care of the interest rate while borrowing money.
- Repayment method: After borrowing a loan for bad credit, usually, borrowers like to repay through multiple monthly instalments. But when you borrow a title loan, you will hardly get such a chance. Instead, you must repay it as soon as possible.
- Credit checking: Unlike most secured loans, this title loan lender hardly thoroughly checks the credit history. In most cases, even with a very bad credit score, a borrower may get the loan. Therefore, if you have no good credit score, there is no reason to worry.
- Mortgage: In exchange for keeping a borrower’s vehicle, money lenders used to lend required debt. At any point in time, if the borrower cannot repay the money, the lender will transform the ownership of that vehicle. Besides, after evaluating the vehicle’s present value, the moneylender will sanction the amount.
Benefits of borrowing Title Loan
Even after a high-interest rate, this type of borrowing also has some benefits. One can conclude that a title loan is better than other conventional secured borrowing processes by analysing these reasons. These include,
- Lack of background check
A title loan is a type of debt that is easy to sanction, and the borrower can get the disbursed amount within even the same day. Due to completing a loan application through the online process, one can quickly get the required amount.
While the loan application is processed during the same day, it is standard that background check is not done thoroughly.
- Same day disbursal
Due to the online application, the loan is disbursed within the same day. For this reason, a person does not need to wait for a long time to get the fund. Only because of this reason, the borrower can mitigate his urgent need for funds.
- Ease of repayment
After the fund requirement is mitigated, one can quickly repay the loan just after 30 days. Although many people oppose this repayment tenure due to its concise term, it is suitable for those borrowers who will be getting funds shortly. When a person receives the fund, he can quickly repay the amount.
- No necessity to pay high interest
A borrower who wants to repay the money through the entire repayment period, i.e. for 12 months, only needs to repay the high-interest rate. On the other hand, borrowers who used to pay within 30 days do not need to pay even an extra penny.
Therefore, these are some notable advantages of borrowing money through a title loan.