Auto Title Loans: What you should know

Needing some cash and only owning your vehicle can be a difficult spot to be in. An auto title loan may be a very workable solution for you. These loans are granted to borrowers who usually own their vehicles free and clear or very close to having them paid off. These loans can be a two edged sword, so here are a few things to consider before applying for that title loan on your car.

The Benefits:

• The obvious benefit of obtaining an auto title loan is the instant cash you can receive by using your vehicle as the only collateral. The lender holds the title to your car; you still get to drive it.
• The process of obtaining an auto title loan can be done online with specialized lenders who provide this service. The process is simple, private and relatively quick; no dragging out time through the traditional methods of regular lenders such as banks, credit unions, etc...
• Because this is a growing lending market, you, the consumer, have a lot of options out there to search for the lower interest rate auto title loan by obtaining quotes from the many companies offering this service. Do a little shopping with your fingertips and it will pay off for you.
• Many of these loans will 'roll over' for up to six months or so, which can be a benefit if something unforeseen does occur, hindering the payoff for any reason.
  The downside
• These are short term loans usually lasting from a two week to a month's duration only, and the interest is going to be high, usually somewhere around 25%. Shopping around for the better interest rate does not mean getting a low interest rate by any means, so make sure that you can afford to pay off the loan in the recommended time frame or you will end up continuing to just pay interest without even touching the principle of the loan.
• If for any reason you cannot pay off the loan within that first month, you are going to get caught in the trap off rolling over to the next month. You keep making a payment that is only being applied towards the interest, not the principle. Calculating an auto title loan at 25% for one month can equal 150% interest at the end of six months if this title loan needs to roll over for any reason.
• There is no room to negotiate with the lenders. If you are unable to repay the loan, they will take your car without exception since they are holding the title and an extra set of keys.

An auto title loan definitely can come in handy for those who need some quick cash in a hurry, but there is a lot of pros and cons to weigh out before deciding to obtain such a loan. If the borrower defaults for any reason, their vehicle is lost without exception. However, for those who have a decent, reliable source of income, this type of loan can prove to be very beneficial, if not costlier, than a tradition type of loan.