What you need to know about a car title loan
A car title loan, or an “auto title loan” or simply a ‘title pawn”, is a short-term secured loan where the borrower surrenders the hard copy title of their car to the lender and allows the lender to place a lien (a legal right on the property/vehicle used as collateral) in exchange for a loan amount for a short period of time. The repayment period for these loans is usually 30 days.
Title loans are usually expensive and you risk losing your car and only means of transportation if you default on payments. It is, therefore, important to understand how they work before you place your car as collateral for any credit.
How title pawn works
To obtain a loan using your car as collateral is much easier and the process may take less than 30 minutes. All you need to do is:
- Fill out a loan application form online or in the lender’s offline store – most lenders have simplified their loan application process and it’s very fast to get your request approved.
- Once your request is approved, you can submit the required documentations to complete the title loan process. In this case, you’ll submit the clear title of your car, the car, proof of insurance, and a photo of your government issued ID.
- The funds will then be disbursed on your checking account on the same business day and once the transaction is complete, the lender will possess your car title until the loan is fully repaid.
It is important to read the lender’s terms before signing their loan agreement form. The lender has to tell you the cost of the loan, the interest charged, the repayment period and all the credit costs charged on the loan. Essentially, you need to be aware of all the finance costs and any other costs that could make your loan more expensive. Please see store associate for details before committing yourself to the loan
How expensive are car title loans?
In states where car title loans are legal, most lenders lend out to borrowers a maximum loan amount of 25% to 50% of the value of the car. These loans, therefore, range from $100 to $5,500. Some lenders will however borrow out up to $10,000.
Normally, lenders will charge 25% on average per month to finance your loan. This amount is equal to an APR of at least 300%. The charges could even be higher if you factor in all the additional charges and fees the lenders may require from you.
So let’s say you borrowed $500 for 30 days, you may end up paying $625 plus other additional charges (that is $125 plus the principal amount of $500) within 30 days.
For an average borrower who depends on his/her monthly income, paying off this single lump sum from their paycheck may not be possible. They will be late on payments, and will therefore, be forced to roll over the loan into another loan.
Late payments will attract penalties and even when you roll over the loan; it would still attract interest and other charges on the new loan. The borrower is then trapped in a cycle of debt that may be difficult to break and could actually lead to their car being repossessed by the lender.
If you are in a financial crisis and need instant cash, it would be best to seek other alternative sources instead of title loans. You can borrow from friends and family, apply for a low interest loan from a traditional bank or a credit service organization.
Eligibility criteria for car title loans in south Carolina
South Carolina residents interested in title loans must:
- Be at least 18 years old.
- Have active email address and phone numbers.
- Have an active bank account.
- Have a valid government issued ID and proof that they are residents of the state they are borrowing from.
Most lenders will require proof of income because they will want to be sure you are able to pay off your loan. They, however, don’t perform credit checks and no matter how bad your credit history is, you can still be approved for these loans. Your car as collateral makes you a less risky borrower.
We understand how frustrating it can be to be in a financial crisis. By filling our loan application form online, we connect you to a pool of lenders who will approve your loan request in less than 30 minutes. There’s no need of wasting time searching through for cheap lenders, let us make your work easier by connecting you to trusted lenders who will not only offer financial aid but also ensure you don’t lose your means of transportation.